Key Points
BTC has lost 28% in the past 30 days alone, but why is Bitcoin crashing, and is the sell-off over already or just getting started?
The market panicked over President Donald Trump’s pick of Kevin Harsh for the top seat at the Federal Reserve.
Why is Bitcoin Crashing? Risk-Off Move Flushes Out Over $8 Billion in Long Positions
His decision caused a massive risk-off move that has already liquidated over $8.6 billion worth of long positions in the futures market since January 28, as per data from CoinGlass.
Bitcoin alone experienced $1 billion in liquidations on February 4. The majority of these liquidations were triggered as the price plummeted below a key support area at $75,000.
Cascade liquidations explain why top cryptocurrencies have been falling off a cliff lately. This phenomenon is known as a “long squeeze.” It forces traders out of their positions by triggering a large number of stop orders.
Fear and Greed Index Drops to Its Lowest Level on Record at 5
The Fear and Greed Index showcases how pessimistic the market is right now as a result of the latest events. This gauge has dropped to its lowest level on record at 5 as of today.
This is a strong indication that investors have zero interest in buying as market conditions have deteriorated.
On previous occasions, extreme pessimism like this has been a “tell” to predict the market’s bottom. However, the chain reaction set off by Trump’s pick could still have long-lasting effects on valuations for the rest of the year.
BTC Bounces Off Key Support as RSI Flashes “Oversold”
Looking at the daily chart, our signal system flagged its latest sell signal yesterday as volumes spiked and a specific candle pattern emerged that confirmed a bearish outlook.
This system tracks “decisional” candles at key levels using a combination of trend direction and volumes.
BTC/USD Daily Chart (Binance) – Source: TradingView
Despite this sell signal, BTC just hit a key support level from which it appears to be bouncing. If this $60,000 level is broken, that would confirm a bearish outlook for the token with a target set at $52,000 next for a 13% downside risk.
The Relative Strength Index (RSI) has dropped to 23 in this higher time frame. This has been the lowest oversold level BTC has reached since August 2023, and it is quite an extreme reading, even for cryptocurrencies.
Where’s BTC Heading Now?
If sellers have exhausted their ammo at this point, a jump to $65,000 seems highly likely to retest former areas of support from below to raise the necessary liquidity.
BTC could spend a while consolidating in a range between $60,000 and $65,000, as the market digests the latest impact of this severe wave of liquidations.
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