Key Points
- Bitcoin’s recent 22% decline is drawing comparisons to previous market corrections.
- With current macroeconomic conditions, the cryptocurrency market could face increased downside risk.
Bitcoin’s recent drop of 22% from its all-time high of $109k is reminiscent of corrections seen in the 2016-17 bull run.
In 2016, despite a full-year return of 122.8%, Bitcoin ended Q1 4% down from its opening price. However, the deeper decline this year raises questions.
2018 Crash and Current Market Conditions
There are similarities between the current market landscape and the conditions in 2018 when Bitcoin crashed 72%. Both periods were marked by Trump’s trade war with China and escalating tariffs.
In 2018, Bitcoin’s price fell to $3,740.50. Now, with $7 trillion in debt refinancing ahead, investors are shifting to safe-haven assets like bonds. This trend could increase the downside risk for Bitcoin and other cryptocurrencies, raising the possibility of a crash similar to 2018.
On-Chain Indicators and Market Sentiment
According to Glassnode’s report, Bitcoin’s market structure has shifted from accumulation to distribution, indicating consistent sell pressure. The Short-Term Holders Spent Output Profit Ratio suggests many investors are selling at a loss.
The current weak accumulation at critical demand zones, coupled with prevailing macroeconomic challenges, mirrors the 2018 crash scenario. Therefore, Bitcoin could face further corrections before establishing a strong support level.
