On February 3, Bitcoin fell to a new local low of $72,950, pushing market sentiment deeper
into panic territory. Dropping from its peak near $126,000 in October 2025, BTC lost 42% and
over $1.1 trillion in market capitalization.
However, the divergence with traditional markets remains stark. U.S. equity indices continue
to trade near record levels, while crypto assets remain deep in bear-market territory. The
S&P 500 is up 3% since October, and the Nasdaq 100 has gained 2% over the same period.
Gold, the asset bitcoin is often compared to, has rebounded swiftly from Monday’s flash
crash and now trades around $5,040, up 28% since October.
Against this backdrop, the market is now split between two competing paths: one in which
bitcoin’s breakdown extends into a deeper bear phase, and another in which extreme
pessimism sets the stage for a rebound.
BTC to slide further in bearish market
On one hand, conditions in the bitcoin market look increasingly dire. Nic Puckrin, CEO of
Coin Bureau, argues that Bitcoin’s technical structure has deteriorated steadily over recent
months. Since breaking below the 50-week moving average in November, momentum has
remained decisively bearish. Two weeks ago, BTC also lost the 100-week moving average.
Last week, the price fell below both the ETF cost basis and the true market mean.
Bitcoin dropped past Strategy’s average cost basis and the April lows of $74,400, exposing
the $70,000 area, just above the previous all-time high of $69,000. According to Puckrin, a
failure there would open the door to a deeper bear-market low, with the key zone to watch
between $55,700 and $58,200. That range sits between the average realized price of all
coins and the 200-week moving average, which he views as a likely long-term bottom.
Charles Edwards, founder of Capriole Investments, points to digital asset treasuries (DATs), the companies buying BTC for their treasuries, which could be a catalyst for a further price slide. digital asset treasuries (DATs) as a potential source of further downside pressure. He argues that the DAT model represents a leverage-driven fragility similar to historical financial excesses. He compares DATs to investment trusts that played a big role in the 1930 market crash.
The Big Short man Michael Burry echoes the warning in a recent Bloomberg piece. He notes that Bitcoin’s prolonged decline could destroy significant value, particularly for companies holding large BTC reserves. He added that Bitcoin has failed to behave as a safe haven in the way gold historically has.
BTC to rebound
On the other hand, markets are cyclical, and deeply oversold conditions often precede rebounds. By multiple measures, bitcoin now appears deeply oversold. Its weekly RSI has fallen below 33, a level even lower than during the March 13, 2020, Covid crash. BTC funding rates are flashing an excess of short positioning. Historically, such conditions have often preceded trend reversals, sometimes sustained, sometimes short-lived.
Beyond near-term technical indicators, Matt Hougan, CIO of Bitwise, offers a broader interpretation. He argues that the crypto market has been in a full-fledged winter since January 2025, even if headline prices masked it for some assets. According to Hougan, heavy ETF and DAT inflows distorted market signals for Bitcoin, Ethereum, and XRP. By contrast, large-cap tokens with less TradFi support, such as SOL and LINK, experienced more typical bear markets. Small-cap tokens, reliant solely on crypto-native demand, were effectively wiped out.
Retail crypto, in this framework, has endured a brutal downturn since early 2025. That helps explain why positive developments around regulation and adoption failed to move prices. Institutional flows, Hougan argues, temporarily obscured the broader weakness.
In his view, that dynamic may now be reversing. As Hougan says, “Good news gets ignored in bear markets, but it doesn’t go away. It gets stored as potential energy. And when the clouds clear and sentiment normalizes, that stored-up energy can return with a vengeance.”
ETF data offers a tentative signal in that direction. Eric Balchunas reported that Bitcoin ETFs bought roughly $500,000 worth of BTC on Tuesday, a modest but notable “buy the dip” move. Net year-to-date ETF flows, however, remain negative at approximately -$970,000.
Whether that marks the start of accumulation or merely a pause in a broader downtrend remains the key question for the weeks ahead.
