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Bitcoin plunged below $90,000 this week, with analysts predicting a further drop to $70,000 amid massive outflows from spot ETFs and unwinding hedge fund strategies. The cryptocurrency has fallen 20% since its January peak above $109,000.
Spot Bitcoin ETFs lost over $1 billion on February 25 alone, marking the largest single-day outflow since their January 2024 launch. This exodus coincides with hedge funds abandoning a previously profitable arbitrage strategy between ETFs and futures.
“Bitcoin goblin town incoming… $70,000 I see you mofo!” warned BitMEX co-founder Arthur Hayes on social media, explaining that institutional players are quickly selling their holdings.
Hayes pointed to hedge funds that went long on ETFs while shorting CME futures to earn yields higher than Treasury rates. As Bitcoin drops and this “basis spread” narrows, these funds must sell ETF shares and buy back futures contracts.
Standard Chartered analyst Geoff Kendrick cautions against buying this dip. “DO NOT buy the dip yet, a move to the low 80s is on,” he stated, predicting further outflows before a recovery.
Chart patterns support this bearish outlook. According to 10X Research, Bitcoin has formed a “diamond top” pattern often associated with trend reversals. Their report identifies $73,000 as a key target aligning with previous support levels.
Beyond ETF dynamics, several factors fuel the downturn. The Bybit exchange suffered a massive $1.5 billion hack last week, eroding investor confidence. President Trump’s announcement of new tariffs on Mexico and Canada sparked inflation concerns.
“Tariff policies are further dampening the outlook, and stubbornly high short-term inflation expectations add to the overall caution,” said Chris Newhouse, a researcher at Cumberland Labs. He added that the Bybit hack “exerted additional downward pressure on price.”
The Federal Reserve’s preferred inflation report comes out Friday, which could influence interest rates.
Cryptocurrency markets face additional strain from an apparent end to the “memecoin boom.” Popular tokens, including LIBRA, are associated with a scandal involving Argentina’s president, and Melania Trump’s namesake token has dropped over 20% this week.
Trading data from Deribit shows investors are preparing for worse to come. Many are buying options that protect them if Bitcoin falls to $70,000 – suggesting they believe this drop is a real possibility.
Analysts suggest the $70,000 level could represent a strong support zone where buyers might step back in. Market watchers are now focused on upcoming economic data and Federal Reserve decisions in March that could signal a turning point for cryptocurrency markets. For now, the “Trump bump” that propelled Bitcoin to record highs appears to be fading as economic reality sets in.
