The chaos in the global financial markets is intensifying. Can Bitcoin's key support level withstand the pressure?

Original Title: Tariffs and Turmoil

Original authors: UkuriaOC, CryptoVizArt, Glassnode

Original translation: Daisy, ChainCatcher

The Trump administration announced the “Liberation Day” tariff policy, leading to severe fluctuations in the financial markets, with major macro indices generally falling, and the digital asset market was no exception, experiencing a comprehensive decline.

Summary

The news of the U.S. imposing additional tariffs has severely disrupted major global financial markets, with multiple markets experiencing one of their worst trading days since March 2020.

The inflow of funds into digital assets has almost come to a standstill, with a significant contraction in liquidity, resulting in strong downward pressure.

· However, based on the price trends of Bitcoin and Ethereum, as prices decline, the scale of losses and exits gradually decreases, which may indicate that the selling pressure in the market is nearing exhaustion in the short term.

The decline of the entire digital asset market is widespread.

· The market value of altcoins has dropped from 1 trillion dollars in December 2024 to the current 583 billion dollars.

· A comprehensive analysis of on-chain and technical models shows that to regain upward momentum, Bitcoin must reclaim the $93,000 level.

· The range of $65,000 to $71,000 below is a key support level that bulls must defend.

The market is experiencing a comprehensive decline.

The Trump administration announced the “Liberation Day” tariff policy, triggering a severe shock in the financial markets, with major stock indices generally declining. The U.S. policy stance has shifted to promote a weaker dollar, lower interest rates, falling oil prices, and reduced fiscal spending. These factors combined may lead to a significant slowdown in the U.S. economy and trigger a substantial contraction in overall liquidity.

The uncertainty brought about by tariffs has become the catalyst for the market’s “risk-averse” sentiment to heat up, triggering a massive sell-off, with several major financial indices recording their worst performance since March 2020.

Source: Yahoo Finance

The digital asset market is particularly sensitive to changes in global liquidity and has not been spared in this round of declines, with many crypto asset prices experiencing double-digit drops.

The price of Bitcoin, as the leading asset, fell from $83,500 to $74,500, with a market value evaporation of about $150 billion.

As the second largest cryptocurrency asset, Ethereum has seen a more severe decline, with its price dropping from $1,800 to $1,380, a reduction in market value of about $40 billion.

Since the beginning of the year, the net inflow of funds into the two major mainstream cryptocurrency assets has significantly decreased. This trend is mainly reflected in the 30-day “realized market capitalization” change, which measures the change in monthly net capital flows of assets.

The monthly inflow peak of Bitcoin once reached 100 billion USD, but has now shrunk to about 6 billion USD.

· The monthly capital inflow peak for Ethereum was $15.5 billion, and it has now turned into a net outflow of $6 billion.

Money inflows into the Bitcoin network are gradually stagnating, indicating that the market lacks new incremental funds to support higher prices. Ethereum’s outflows are mainly due to ETH bought at a high price being spent at a low level, resulting in a capital loss. This also shows that Ethereum is currently facing greater resistance than Bitcoin, and the market performance is relatively weaker.

If we take the collapse of FTX at the end of 2022 as a starting point to observe the overall changes in the “realized market cap” of Bitcoin and Ethereum, we can quantify the scale of capital that these two assets have absorbed since the low point of this cycle.

The realized market value of Bitcoin increased from $402 billion to $870 billion, a growth of $468 billion, representing a 117% increase; the realized market value of Ethereum increased from $183 billion to $244 billion, a growth of $61 billion, representing a 32% increase.

The gap in capital inflow between the two partly explains the divergence in performance of the two major asset markets since 2023. Ethereum has attracted significantly less capital and new demand in this cycle compared to Bitcoin, resulting in a relatively weaker price increase that has not reached a new high, while Bitcoin has already surpassed the $100,000 mark in December 2024.

The MVRV ratio is used to measure the relationship between the spot price and the realized price, reflecting the average unrealized profit or loss of each asset holder. When the MVRV ratio is above 1, it indicates that the average holder is in a state of unrealized profit; below 1 indicates a state of unrealized loss.

Since the start of this bull market in January 2023, the MVRV ratio of Bitcoin and Ethereum has shown a significant divergence again. Bitcoin investors have consistently held a higher level of unrealized profits, while Ethereum’s MVRV ratio dropped below 1.0 again in March this year, indicating that the majority of holders have entered the loss zone.

By calculating the difference between the MVRV ratios of Bitcoin and Ethereum, we can identify whether, on average, Bitcoin holders’ unrealized gains are better or worse than those of Ethereum holders during certain periods.

The positive difference indicates that the average unrealized gains of Bitcoin investors are higher than those of Ethereum investors; a negative difference indicates that Ethereum investors have a stronger average profitability.

As mentioned earlier, since the start of this bull market, the average profit level for Bitcoin investors has been higher than that of Ethereum investors.

As of now, this trend has lasted for 812 days, setting the record for the longest duration.

It can be seen that Ethereum’s performance in this round is relatively weak, mainly due to the inflow of funds and investment demand being significantly smaller than that of Bitcoin. The differentiation trend between the two can be further reflected by the ETH/BTC price ratio.

Since the “Merge” upgrade in September 2022, the ETH/BTC exchange rate has plummeted from 0.080 to the current 0.0196, a decline of 75%. This is the lowest level for this trading pair since January 2020, with only 500 out of 3531 trading days having a ratio lower than the current level.

In addition, this current round of bull market has almost not seen a phase where Ethereum consistently outperforms Bitcoin, which is extremely rare in past bull markets, further indicating that the market structure of this cycle has clearly deviated from the historical patterns and performance that investors are familiar with.

Review of Loss Situation

After experiencing a significant drop like this week, it is particularly important to examine investors’ reactions, especially in the context where bear markets are often triggered by rising panic and massive losses.

By assessing the realized losses over a 6-hour rolling window, we can better understand the behavior and emotional responses of market participants during the current downtrend.

The “surrender sell-off” event by Bitcoin investors was significant, with a peak loss of up to $240 million within a 6-hour window, making it one of the largest loss events in this cycle.

However, as the price continues to dip, the scale of realized losses is gradually shrinking, indicating that the market may be showing signs of short-term selling pressure exhaustion within the current price range.

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Ethereum has also exhibited a similar behavioral pattern, with a single realized loss peak reaching as high as 564 million USD during this round of decline, becoming one of the largest sell-off events since the bull market began in January 2023.

As prices gradually decline, the realized losses of Bitcoin and Ethereum are both weakening, which may indicate that investors are gradually adapting to the lower price range and the current turbulent market environment.

Market contraction

The continued tightening of market liquidity has led to a significant devaluation of the entire altcoin sector. Assets further out on the risk curve are particularly sensitive to liquidity shocks, often accompanied by more severe price pullbacks.

As of December 2024, the overall market value of altcoins (excluding Bitcoin, Ethereum, and stablecoins) peaked at 1 trillion USD during this cycle. Since then, the market value has significantly retreated and currently stands at 583 billion USD, having dropped over 40% in just a few months.

It is worth noting that in this round of pullback, the various sub-sectors of altcoins did not show significant differentiated trends. The overall decline is widespread, with all sub-sectors experiencing significant depreciation, and even Bitcoin recorded negative returns in the past three months.

Interval Analysis

Finally, we will assess the market’s response to key technical indicators and the on-chain cost range. These reference tools help investors make judgments and decisions in a volatile and uncertain market environment.

Technical analysis has long been an important tool for investors, and Bitcoin investors typically focus on a set of key moving averages. Among them, the 111-day, 200-day, and 365-day moving averages (111DMA, 200DMA, 365DMA) are commonly used indicators to measure Bitcoin market momentum.

You can refer to the following technical framework for analysis:

The first drop of Bitcoin below the 111-day moving average ($93,000) marks a significant blow to market momentum, and there has not been an effective rebound attempt since.

After the initial drop, the price fluctuated around the 200-day moving average ($87,000), which is considered by most technical analysts as the dividing line between bulls and bears. The market showed significant hesitation in this range, ultimately leading to another downward movement, starting a new round of price decline.

Recently, the price has first fallen below the 365-day moving average (76,000 USD) since the 2021 cycle. This key momentum support level has not yet been completely lost; if it cannot remain stable, it may trigger further downward trends.

In the bullish uptrend phase, short-term holders (STH) are typically the group that bears the main losses during market panic sell-offs. Their behavioral and emotional changes can serve as important reference indicators for assessing the intensity of market corrections and how investors respond.

Short-term holders (STH) cost basis has traditionally been viewed as a key reference level for assessing market momentum during bull markets. Constructing a ±1 standard deviation range around this cost basis often serves as the upper and lower bounds for local price fluctuations.

· Short-term holder cost basis +1σ: $131,000

· Short-term holder cost basis: $93,000

· Short-term holder cost basis -1σ: $72,000

Bitcoin has fallen below the short-term holder cost basis (STH-CB) for the first time, indicating that market momentum is beginning to weaken (it also fell below the 111-day moving average). Subsequently, the price rebounded below this cost line and encountered resistance, confirming a shift in investor sentiment.

Currently, the spot price of Bitcoin has stabilized between the STH cost benchmark and its lower -1 standard deviation, forming the upper and lower boundaries of the current trading range, which is $93,000 to $72,000.

Active Realized Price and True Market Mean are another set of price models, typically located near the midpoint of the Bitcoin cycle. These two models estimate the cost basis of active market participants by excluding lost or long-unused supply.

From a statistical perspective, the spot price fluctuates above or below these two models on approximately 50% of trading days. Therefore, they can serve as important mean reversion references, while also being used to delineate the market state boundaries between bull and bear markets.

· Active Realized Price: $71,000

· True Market Mean: $65,000

The consensus of multiple on-chain price models suggests that the $65,000 to $71,000 range is a key area for bulls to establish long-term support. If the price effectively falls below this range, it will mean that the vast majority of active investors are in a state of floating loss, and the overall market sentiment may be significantly hit as a result.

Conclusion

Due to the increasing uncertainty caused by US tariff policies, pressure on global financial markets continues to rise. This weakening trend has spread to almost all asset classes, as evidenced by significant corrections in major macro indices.

The digital asset market has also not been spared, with a comprehensive contraction across various sub-sectors. Bitcoin’s price once dipped to $75,000, marking one of the largest retracements since the bull market started in January 2023. Ethereum’s decline has been even more severe, and many long-tail crypto assets are currently deep in a bear market trend.

Based on the analysis of various on-chain and technical price models, the range of $65,000 to $71,000 is considered a key area for bulls to rebuild long-term support. If the price of Bitcoin falls below this range, market sentiment may suffer a significant blow, as the majority of active investors’ positions will be in a state of unrealized loss.

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