The cryptocurrency market is in turmoil. Bitcoin, the benchmark of the crypto world, has plummeted, triggering widespread panic in the market. According to data from The Block, the spot trading volume of centralized exchanges (CEXs) reached $1.77 trillion in February, down 23.7% from $2.32 trillion in January, indicating a significant decline in market activity.

At the same time, crypto analyst Miles Deutscher pointed out on social media that only 12 out of the top 100 cryptocurrencies by market cap have seen positive returns in the past 90 days. This severe polarization and the decline in trading volume together paint a picture of extreme market panic. Does this mean that a bear market has quietly arrived?

Market Sentiment and Fear Index

Market sentiment is one of the important indicators for judging trends, and liquidation data as a direct reflection of market sentiment provides a key supplement to this analysis. Currently, the Crypto Fear & Greed Index has fallen to 35, in the "Fear" zone, a significant drop from 70 ("Extreme Greed") a month ago. This index comprehensively reflects factors such as volatility (25%), market trading volume (25%), social media sentiment (15%), survey questionnaires (15%), Bitcoin dominance (10%), and trends (10%), clearly reflecting the rapid deterioration of investor confidence.

Glassnode's Net Unrealized Profit/Loss (NUPL) indicator further confirms this trend, dropping from 0.6 (high greed) to 0.2, approaching the level of the early stages of historical bear markets. Usually, when it falls below 0, it signals that the market has entered the capitulation phase. The current value indicates that although the market has not yet completely collapsed, the panic sentiment is approaching the critical point.

CryptoQuant data shows that the demand growth in the Bitcoin spot market is slowing down, and the proportion of short positions in the futures market's open interest has risen significantly. As of March 9, the proportion of short positions in CME Bitcoin futures reached 45% of the total open interest, up 15 percentage points from the 30% at the beginning of February. This trend of short dominance has exacerbated the market's panic sentiment, and investors' expectations of price declines have increased, with some even discussing the possibility of Bitcoin falling below the $60,000 psychological level.

Technical Analysis: Key Support and Resistance

From a technical perspective, Bitcoin's price is at a critical juncture. After the high volatility period from November 20, 2024 to February 24, 2025, the price has formed a potential double top pattern - a typical bearish signal. After the neckline of the double top was broken, the price retreated from the high of $82,000 to around $76,000, with the amplitude already approaching the expected target (about 10%), but the time dimension has not yet been fully digested.

Analysts generally believe that the market may face two paths:

• Path 1: Time for Space If $78,000 becomes the bottom, bulls and bears need to be patient and wait for two to three months to confirm the trend. Currently, the area between the 50-day moving average (around $77,500) and the 200-day moving average (around $72,000) has become the focus of short-term tug-of-war. If the price can hold above $78,000, it may form a W-bottom pattern, laying the foundation for a subsequent rebound.
• Path 2: Further Downside If the bears are dominant, the price may fall to the left trading-dense area of $70,000-$72,000. This area not only serves as the support of the 200-day moving average, but also the important retracement level after the rebound from the low in August 2024. Trader Eugene Ng Ah Sio said in a Telegram group: "I'm not in a hurry to participate in the current price, $75,000 is the only level I'm interested in." This cautious attitude reflects the uncertainty in the market.

In addition, the Relative Strength Index (RSI) is currently at 42, having fallen from the overbought zone (above 70) to a neutral-to-low level, indicating that the selling pressure has eased somewhat, but has not yet entered the oversold zone (below 30). Technical analysis suggests that investors should remain cautious, avoid blind chasing or buy the dips, and wait for the trend to become clearer.

Macroeconomic Background: Exhaustion of Positive News and Uncertainty

Macroeconomic factors cannot be ignored in their impact on the cryptocurrency market. First, changes in the global interest rate environment are putting pressure on high-risk assets. The yield on the 10-year US Treasury bond has recently risen to 4.2%, up 40 basis points from 3.8% at the beginning of the year, attracting funds to flow back from the crypto market to traditional safe-haven assets. At the same time, inflation expectations remain high, and the US Federal Reserve may delay rate cuts, further diminishing the appeal of Bitcoin as a "digital gold".

At the legislative level, the weakening of positive news has also exacerbated market pressure. For example, the Bitcoin bill in Utah, which was passed by the state Senate on March 7 with 19 votes in favor and 7 against, and is about to be signed into law by the governor. However, its core provision - allowing Utah to hold Bitcoin as a reserve asset - was removed in the final review. The original provision would have authorized the state treasurer to invest in Bitcoin, with a cap of 5% of its market value (about $25 billion), which could have made Utah the first US state to hold Bitcoin reserves. Now, the bill only retains basic rights such as custody protection and Bitcoin mining and node operation, significantly reducing its impact.

The exhaustion of macroeconomic positives has undermined market confidence, and external uncertainties (such as potential adjustments to crypto policy by the Trump administration) are also adding variables to the market. Bloomberg analysts predict that if Trump is re-elected, his tax-cutting and deregulatory policies could provide a short-term boost to the crypto market, but the long-term effects remain to be observed.

ETF Outflows: Waning Institutional Enthusiasm

Institutional demand was an important driver of the rise in Bitcoin prices in 2024, but the recent outflows from spot ETFs are a cause for concern. According to sosovalue data, since March, net outflows from US Bitcoin spot ETFs have exceeded $500 million, with Grayscale's GBTC being particularly significant. Julio Moreno, head of research at CryptoQuant, pointed out: "The growth in Bitcoin spot demand is contracting, and short positions in the futures market are dominating, directly leading to the price decline."

Jacob King, founder of WhaleWire, went even further: "The Bitcoin bear market is here. Record ETF outflows, the institutional demand narrative has collapsed, and Bitcoin is heading towards multi-year lows." Although this view is rather extreme, the ETF outflows do reflect a waning of institutional enthusiasm. At the beginning of 2024, the daily net inflow to ETFs reached as high as $200 million, but has now turned to net outflows, indicating that institutional investors are reassessing the risk-return ratio of crypto assets. This change further undermines market confidence.

On-chain Data: Coexistence of Hope and Uncertainty

On-chain data provides a glimmer of hope for the market. According to Glassnode's analysis, the behavior of long-term holders (investors with holdings exceeding one year) is undergoing a shift, from the distribution phase to the accumulation phase. As of March 9, the net position change of long-term holders has turned positive, with an average daily inflow of around 5,000 Bitcoins. Historically, this turnaround in trend has often been a reliable signal of the market transitioning from the top to the bottom, such as the bottom formation periods in early 2019 and March 2020.

However, the current situation differs from previous cycles. First, the price decline may be slow and sustained, and only when long-term holder holdings reach a new high (e.g., exceeding 700,000 Bitcoins) is a relative bottom likely to be reached. Second, the emergence of spot ETFs has changed the holder structure. Arkham Intelligence data shows that ETF holders currently control about 4% of the circulating Bitcoin supply (around 840,000 Bitcoins), while the proportion of traditional on-chain long-term holders has dropped from 65% in 2023 to 60%. This may weaken the predictive power of traditional on-chain indicators.

Although the shift of long-term holders to a buy mode is encouraging, the inflow is still in the initial stage, and the possibility of a reversal has not been ruled out. Predictions of the market bottom still need to be verified by more external signals.

Historical Comparison: Similarities and Differences in Bear Markets

Looking back at history, the current market has similarities with the bear markets of 2018 and 2022, but also significant differences. In 2018, Bitcoin plunged from $20,000 to $3,200, a decline of over 80%, accompanied by the bursting of the ICO bubble and a contraction in trading volume; in 2022, it fell from $69,000 to $16,000, a decline of about 76%, affected by the FTX collapse and interest rate hikes. Currently, Bitcoin has fallen about 7%-13% from its peak of $82,000, far from the historical bear market levels.

The similarities lie in the decline in trading volume and market segmentation. For example, in 2018, CEX trading volume declined 70% from its peak, while currently it has only declined 23.7%. The differences lie in the degree of institutional participation and the emergence of ETFs, which provide a new buffer mechanism for the market. Therefore, the current panic may be an adjustment period rather than a full-blown bear market, but if ETF outflows continue to expand, the historical tragedy may repeat itself.

Whether the market has entered a bear market is still inconclusive. Technically, the risk of a pullback still exists, with key support levels at $78,000 and $75,000 being tested; macroscopically, positive news is limited, ETF outflows are intensifying, and the institutional narrative is weakening; on-chain data, although suggesting a rebound in long-term holder confidence, has not yet revealed a clear bottom. The current panic may be a harbinger of a deeper adjustment, or it may be the darkness before the dawn.

For investors, caution is paramount. As Miles Deutscher said, "This is a rotational market, and holders are being punished." Rather than chasing short-term volatility, it is better to focus on the convergence of technical support, macroeconomic dynamics, and on-chain signals. Drawing on the wisdom of Warren Buffett - "Be fearful when others are greedy, and greedy when others are fearful" - in the turbulent waves of the crypto market, risk management and a long-term perspective are the keys to survival.