- The crypto market decline is linked to risk aversion spilling over from traditional markets, especially profit-taking in AI stocks.
- Bitcoin shows technical bearish signals, including a death cross and weekly close below its 50-week moving average.
- On-chain data shows eight out of ten metrics in bearish territory, with derivatives and options data reflecting bets on further price drops.
- A recovery could depend on Bitcoin closing above $105,000, supported by a dovish Federal Reserve and positive economic indicators.
The cryptocurrency market is experiencing increased selling pressures amid broader financial uncertainty. Bitcoin, the leading digital currency, has triggered key technical indicators pointing toward a possible bear market. As of now, Bitcoin trades near $91,600 after a nearly 14% decline over the past week.
Key technical events include a death cross, where the 50-day moving average fell below the 200-day moving average. This short-term momentum decline below the long-term trend signals potential bearish market behavior. Furthermore, Bitcoin’s most recent weekly candlestick closed under its 50-week moving average, a level just above $100,000, marking the first such close since October 2023.
This price action has caused analysts to consider a bear market underway. On-chain analysis from the CryptoQuant Bull Score index reveals eight out of ten key metrics in bearish mode during ongoing market losses.
According to Farzam Ehsani, CEO of VALR, the primary reason for the crypto’s downturn is increased fear among investors in traditional markets. Risk aversion has spread from technology stocks, particularly those connected to Artificial Intelligence, where profit-taking has intensified. Ehsani points out that crypto markets often move in parallel with tech equities under risk-off conditions.
Derivatives data show an open interest increase, surpassing levels from early October. This indicates persistent trader speculation despite the downtrend. A decline in cumulative volume delta alongside rising open interest suggests many investors are opening short positions, anticipating further Bitcoin Price decline. Options data also show a drop in 25-delta skew to negative values, reflecting ongoing put buying for downside protection.
However, perpetual futures data highlight rising funding rates and increased bid-ask delta at depths between 5% to 10%, signaling some buyers are stepping in to purchase dips. If Bitcoin cannot stabilize, these buyers may be forced to sell, potentially triggering a long squeeze and accelerating price drops.
Ehsani suggests a short-term recover or rebound is possible if Bitcoin consolidates above $100,000. He identifies two crucial factors—a Federal Reserve commitment to interest rate cuts in December and strong U.S. economic growth statistics accompanied by controlled inflation—that could support sentiment. Still, Ehsani emphasizes that a clear breakthrough above $105,000 is needed to confirm a sustained growth trend, while the current outlook expects continued selling pressure suppressing recovery attempts.
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