Bitcoin’s bear market poses biggest challenge for new investors in the crypto world
Cryptocurrency investors who rushed into the market during the height of Bitcoin’s rally past US$100,000 are now grappling with the consequences of their hasty decisions as the digital currency plunges into a bear market. The fervor surrounding Bitcoin reached a peak following the election of Donald Trump, attracting a surge of new investors eager to capitalize on the hype.
However, in a stark turn of events, Bitcoin has now tumbled into a bear market, shedding nearly a quarter of its value and plummeting to around US$80,000 from its record high of US$109,071 just weeks earlier. This decline has left many newcomers, particularly those who leveraged borrowed money to invest, feeling the financial strain of their decisions.
Data from Glassnode reveals that approximately 20 million new Bitcoin addresses have been created in the last three months, indicating a significant influx of investors into the market. However, the spent output profit ratio, a metric that measures the ratio between the prices at which new Bitcoin is being bought and sold, has plummeted to the lowest level in over a year, painting a bleak picture for recent buyers.
Analysts at Bitfinex note that newer investors are locking in substantial losses due to the ongoing market turmoil, which has created exceptionally challenging conditions for those who entered the market at its peak. A series of external factors, including concerns about US tariff policies, the overall health of the global economy, and a tech sell-off, have contributed to the downward spiral of Bitcoin’s price.
Even the announcement of Trump’s executive order to create a strategic reserve for Bitcoin failed to provide sustained relief for the crypto market. The corrective sell-off caught many investors off guard, leading to significant losses for traders with leveraged positions. Data from Bitfinex shows that this group is realizing losses exceeding US$800 million per day, underscoring the impact of the market downturn on leveraged investors.
Additionally, investment products tied to digital assets have witnessed outflows for four consecutive weeks, resulting in a decline in total assets under management to around US$142 billion. The outflows from US spot Bitcoin ETFs on Feb 25 marked the largest daily outflow since their inception in January the previous year, according to JPMorgan data.
As Bitcoin strives to find support amidst the market turbulence, its future remains uncertain. While past sell-offs in the cryptocurrency market have been followed by periods of stability, Bitcoin’s fate may now be intertwined with broader market trends. With implied volatility on the rise and investors anticipating more turbulence ahead, the road ahead for Bitcoin and other digital assets remains uncertain as they navigate through the current market challenges.
