Author: Stephen Alpher

Compiled by: Centreless

Summary

• The speculative bubble in the overall cryptocurrency market has burst, and Bitcoin is now mired in a frenzied sell-off.

• Many Bitcoin bulls have at least turned bearish in the short term.

• The traditional market is also stumbling, and the resulting interest rate decline may be paving the way for Bitcoin's next bull market.

"If it wasn't for you, I wouldn't be in this mess. You brought me all this trouble." - In Martin Scorsese's 'Casino', Robert De Niro's character Ace Rothstein says this to Joe Pesci's character Nicky Santoro.

It is understandable for Bitcoin investors to blame the rest of the cryptocurrency market for the drop in Bitcoin prices. Bitcoin prices have fallen more than 20% from the record high of over $109,000 just 5 weeks ago, dropping as low as $87,000 earlier this week.

Bitcoin reached this record on the eve of the presidential inauguration, when the cryptocurrency market's speculative frenzy for various memecoin reached a peak. The Trump team thought it was a good idea to launch tokens related to the incoming president and first lady, and these tokens quickly skyrocketed and then crashed, causing huge losses for everyone except insiders.

Many memecoins were created on the Solana blockchain, and its native token SOL has since fallen more than 50%, leading the major cryptocurrencies to plummet since that weekend in January.

The Bitcoin bulls originally expected a strategic Bitcoin reserve, but what they got instead were 'Trump' and 'Melania' tokens.

Bybit Exchange Hack Brings Blow

Although memecoins have shrunk significantly in the past few weeks, and the entire cryptocurrency market is in a dire state, Bitcoin prices have mostly remained in a relatively narrow range, not far from the all-time high. Just 96 hours ago, the world's largest cryptocurrency Bitcoin was still rising, seemingly poised to reclaim the $100,000 level.

However, the hacking incident at the Bybit exchange occurred.

While Bitcoin investors quickly pointed out that this vulnerability has nothing to do with Bitcoin itself, but rather again proves the inherent flaws in Ethereum technology, the plunge in Ethereum prices (down 15% since then and still continuing) has spread the downward trend in the entire cryptocurrency market to Bitcoin.

Bulls Turn Bears

StackHodler, who calls himself a perpetual bull, wrote on the X platform (formerly Twitter) on February 25: "Our expectations for this cycle were far above $108,000, so we told ourselves that prices couldn't have already peaked. We'll surely go even higher by 2025, right?" He continued, "The truth is, no one knows for sure. We just experienced short-term holders realizing prices at $92,000... We may need to revisit the $82,000 200-day moving average."

Previously, Standard Chartered's Jeff Kendrick had predicted that Bitcoin would reach $200,000 by the end of the year, writing: "It's not yet time to buy the dip, as prices could fall to just over $80,000. I think we'll see a single-day Bitcoin ETF outflow of $1 billion (the worst day so far has been $583 million) before buying the dip becomes attractive."

The Seeds of the Next Bull Market Are Being Sown

While the traditional market has not been hit as hard as the cryptocurrency market, it is also stumbling. Measured by the S&P 500 index, the US stock market experienced its worst week since Trump's inauguration last week. The Nasdaq index, dominated by tech stocks, has fallen 5% from its December peak.

Take your pick of reasons: tariffs, "DOGE" (not the cryptocurrency Dogecoin, but Musk's government cost-cutting policies), or just a cooling of the previously overheated market sentiment, but the bond market has already responded.

The yield on the 10-year US Treasury has fallen from 4.80% before Trump's inauguration to 4.32%. Market expectations for the Fed to ease monetary policy have risen sharply. According to the CME's Fed Watch tool, the probability of a rate cut in May has more than doubled in the past week to 30%, and the probability of two rate cuts by June has more than doubled to 15%.

Kendrick concluded: "The decline in US Treasury yields is a major long-term positive factor for Bitcoin."