After a series of hacking incidents, the market sentiment has also plummeted, with Bitcoin falling for two consecutive days, briefly falling below $83,000 this morning. Following the $1.5 billion liquidation across the network the previous day, the past 24 hours have seen $700 million in liquidations, with $611 million in long positions and $154 million in short positions. Additionally, in the past 24 hours, a total of 184,998 people have been liquidated, with the largest single liquidation occurring on Bitfinex - tBTCF 0:USTF 0 worth $8.2054 million.

According to Alternative data, the cryptocurrency Fear and Greed Index has dropped to 10 today (from 25 yesterday), with the market sentiment shifting from neutral to extreme fear, reaching a new low since July 2022. The market has seen Bitcoin experience several sharp short-term declines recently, and the following are the market reasons for Bitcoin's decline compiled by BlockBeats, for readers' reference only.

Large-scale liquidation of IBIT

On February 25, BitMEX co-founder Arthur Hayes tweeted that the Bitcoin flash crash is related to the IBIT hedge fund. Many $IBIT holders are hedge funds that are long on ETFs and short on CME futures to earn higher returns than their investments in short-term US Treasuries.

If the basis declines with the decline in $BTC, these funds will sell $IBIT and repurchase CME futures. These funds are in a profitable position, and given that the basis is close to the US Treasury yield, they will unwind their positions and realize profits during the US trading session, and Bitcoin may fall back to $70,000.

Previously, Arthur Hayes had published a blog post expecting that due to the lack of fundamental changes in US politics despite Trump's election, the price of cryptocurrencies could fall back to the level of Q4 2024.

Therefore, Arthur Hayes still believes that Bitcoin will retest the $70,000 to $75,000 range. Only if the Federal Reserve, the US Treasury, Japan, or others print money in some form, or enact specific legislation allowing permissionless crypto innovation, can the current market conditions be improved.

The Bitcoin strategic reserve policy is very poor, "the fundamental problem with governments hoarding any asset is that they buy and sell assets primarily for political, not financial, interests." This policy may change with political changes, thereby altering Bitcoin's original trend.

Related reading: Arthur Hayes' New Article: Beyond Bitcoin's National Reserves, the US Crypto Hegemony Has Other Intentions

Delayed realization of Bitcoin strategic reserve expectations

Trump's plan for a Bitcoin strategic reserve has been delayed, and market confidence has been eroding. In a recent tweet, Arthur Hayes mentioned that the fundamental problem with governments hoarding any asset is that they buy and sell assets primarily for political, not financial, interests. Those who are building truly decentralized technologies and applications do not have enough financial power to play politics at critical moments in this cycle. Therefore, the desire for crypto regulation may be realized, and if it does, it will be in an overly complex, prescriptive form that only large, wealthy, centralized companies can afford.

This is indeed the case. On February 21, the probability on Polymarket that "Trump will establish a strategic Bitcoin reserve within 100 days of taking office" had dropped to 10%, while on January 20, the day of Trump's presidential inauguration, the probability had once reached 48%.

The expectation of a BTC strategic reserve has not been fully realized. At the national level, Trump has not yet introduced a BTC strategic reserve bill, and he has even been absent from the cryptocurrency market for some time. At the state level, many proposals have been made but then rejected.

On February 24, the Montana House of Representatives voted against a bill proposal on February 22 that would have made Bitcoin a state reserve asset. The bill proposed establishing a special revenue account to invest in precious metals, stablecoins, and digital assets with a market capitalization of over $750 billion, of which Bitcoin is currently the only one that meets this standard. The bill was opposed by several Republican lawmakers who believed it would allow the state investment board to engage in excessive speculation with taxpayer funds at high risk. Supporters argued that if the bill was not passed, the state government would miss the opportunity to improve its investment returns. Currently, the bill has been essentially shelved and would need to be resubmitted to the legislature for consideration if it is to be revived in the future.

On February 25, according to Cointelegraph, the South Dakota House of Representatives Commerce and Energy Committee decided to postpone the HB 1202 bill to the "41st day" of the current legislative session during the legislative session on February 24. However, the state legislature has a maximum of 40 days, effectively amounting to a rejection of the bill, meaning the state will not include Bitcoin as an official investment option for the time being.

Related reading: Arthur Hayes' New Article: Beyond Bitcoin's National Reserves, the US Crypto Hegemony Has Other Intentions

Is the bull market still ongoing?

On the other hand, the poor performance of cryptocurrency-related stocks in the US stock market has constrained liquidity flows, with liquidity shifting from the crypto market to assets such as US stocks, gold, and US bonds, limiting capital inflows into the crypto market. This is reflected in the market's expectations, specifically:

Coinbase (COIN) fell 2.7%; Tesla (TSLA) fell 2.66%; Trump Media & Technology Group (DJT) fell 5.59%; MicroStrategy (MSTR) fell 4.73%; MARA Holdings (MARA) fell 5.12%; Riot Platforms (RIOT) fell 4.67%; Hut 8 Corp. (HUT) fell 8.48%.

A large part of the reason may be that tariff issues, although delayed, have arrived, with the Trump administration declaring that it will impose tariffs on Mexico and Canada on time, further strengthening the US dollar. This has raised the risk of declining sales for the tech seven small dragons that make up a large portion of the Nasdaq index, with the risk of a liquidity outflow bursting the AI bubble.

Traders in the market have also presented data from the previous cycle and the cycle before that, indicating that this cycle has not changed the inherent pattern of the cycle due to Trump's election, and multiple traders believe we are in a mid-bull market correction, but the overall short-term outlook is bearish.

cburniske believes the current market scenario is similar to the market in 2021, and that our current bull market is no different from the previous ones, with data showing we are actually in the mid-stage of a bull market:

During the same period in 2021, Bitcoin ($BTC) fell 56%, Ethereum ($ETH) fell 61%, and Solana ($SOL) fell 67%, with many other tokens falling 70-80% or more. While there may be various reasons used to explain why this cycle is different from the past, the mid-bull market we are currently experiencing actually has historical precedents. Those who believe the market has entered a full-blown bear market are actually being misled.

@RaoulGMI uses the 2017 BTC macro structure for a horizontal comparison and believes we will likely see a 2-3 month correction before reaching new highs.

Here is the English translation: The market participants need to be patient, as the current macroeconomic structure is very similar to that of 2017: Bitcoin has experienced five corrections, each exceeding 28%, and most of the corrections lasted 2 to 3 months before reaching new all-time highs. Meanwhile, other altcoins have experienced around 65% corrections. During this stage, the market is filled with various noises and uncertainties. Therefore, we should focus our efforts on more constructive activities rather than being distracted by market volatility. Technical analyst @CryptoPainter_X believes: The short-term trend of the current market has some support, but the overall situation is still in a consolidation range. After reaching the secondary demand area on the 4-hour chart, the short-term may have a supporting effect, especially when the spot premium is oscillating around the 0 axis, unable to completely break the consolidation range. Given that the small support areas in the consolidation are usually easily broken, it is necessary to pay attention to whether the previous rhythm will continue, and if the small support is broken, it may mean the continuation of the downward consolidation. Furthermore, the current price has broken through the lower limit of the consolidation channel at 91,400 (blue line), and the candlesticks have not shown long wicks, so the strength of the short-term rebound will determine the subsequent trend. The blue line coincides with the core demand area, theoretically providing short-term support. However, as the channel is about to move downward and may turn, the long-term trend is still biased towards the short side, which also suggests that the market may face further downward pressure. Overall, although a short-term rebound may occur, if it cannot break through the middle rail or the consolidation range, the market may still maintain a weakly consolidating trend.