Bitcoin fell below $60,000 on Friday, its worst weekly performance since the collapse of Sam Bankman-Fried’s FTX exchange in 2022. The forces currently driving the market appear mild by comparison, but have alarmed analysts, who warn that Bitcoin's modest rebound may be short-lived as structural flaws are exposed.

Investors are fleeing Bitcoin exchange-traded funds, technical indicators are weakening, and interest rate expectations have shifted. While the current crypto winter appears to be milder than previous ones, that could mean the worst is yet to come.

"I think there's room to go further," said Griffin Ardern, co-founder of multi-asset manager Primal Fund. "We're still some way off from the true bottom."

Bitcoin has recovered after plunging 16% in the seven days through Sunday, its biggest weekly drop since the collapse of FTX triggered a 23% plunge in November 2022. It was an unforgettable year for cryptocurrencies, beginning with the collapse of a stablecoin called TerraUSD, which wiped out $40 billion in market value and triggered a string of corporate failures.

Bitcoin fell below $60,000, hitting its lowest level since October 2024 and down more than 50% from last year’s all-time high above $126,000. At 08:40 Singapore time on Wednesday, the price of Bitcoin fell 1% to about $61,500.

Last week’s sell-off was partly attributed to Michael Saylor’s Bitcoin-buying company Strategy Inc. Divesting a small portion of its holdings undermines claims that the company will never sell.

Strategy came out to calm the market sentiment on Monday, saying that it had spent approximately US$101 million to purchase 1,550 Bitcoins, far exceeding the US$2.5 million previously sold. However, restoring market confidence may not be easy.

Technical signals weaken. Bitcoin last week fell below its 200-week moving average, a metric closely watched by many traders and often used as a gauge of market support. A move below this level could add to market caution, as it would suggest the rally could turn into a sell-off rather than a rally.

Ardern said that at a true bottoming point, long-term options tend to show a more bullish trend, and that is not happening currently.

Investors are already hesitant. They have withdrawn approximately $5.5 billion from U.S.-listed spot Bitcoin ETFs amid 13 consecutive trading days of net outflows.

Paul Howard, senior director at cryptocurrency trading firm Wincent, described the current decline as a “hidden bear market” because a major crash like FTX’s has not yet occurred.

Howard said that "a fall below the 200-week moving average is a strong confirmation that the market may have entered a bear market phase." He added that given Bitcoin's high volatility, "this rebound is unlikely to be sustained."

interest rate expectations

Shifts in interest rate expectations are part of the problem, as the prospect of rising borrowing costs will attract outflows from speculative assets such as cryptocurrencies.

There is still no solution to the US-Iran war, coupled with strong US employment data, the market's expectations for an interest rate cut by the Federal Reserve have turned into expectations for an interest rate increase.

“There’s been a huge reversal in expectations,” said Rajiv Sawhney, head of international portfolio management at Wave Digital Assets.

Sawhney said that Bitcoin has also lost its positive correlation with U.S. stocks as funds shift away from cryptocurrencies and into artificial intelligence and technology companies, but he does not expect funds to flow back into cryptocurrencies even if the stock market reverses.

The current correction is still smaller than previous cryptocurrency winters. Bitcoin prices are down about 50% from their peak, compared with about 80% in the previous bear market. After reaching its peak in 2021, it took Bitcoin more than a year to hit the bottom, and another 15 months to return to its previous peak.

It's because of this history that some traders are now reluctant to declare that prices have bottomed.

Hayden Hughes, managing partner at Tokenize Capital, said digital asset managers like Strategy pose “a unique kind of risk” to the cryptocurrency industry. These companies hold large amounts of cryptocurrency and could be forced to sell if financing conditions tighten or share prices fall.

Hughes said that the stock market may face systemic risks in the coming months, and these risks may spread to the cryptocurrency field.

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