Bitcoin could face a temporary decline toward the $72,000 support level, as the anticipated market recovery is hampered by a significant drop in investor sentiment, reaching lows not seen since 2022.
On February 28, the price of Bitcoin (BTC) plummeted to an over three-month low of $78,197, marking a decline of more than 28% from its all-time high of over $109,000 achieved on January 20.
According to Iliya Kalchev, a dispatch analyst at the digital asset investment platform Nexo, Bitcoin may undergo a further retracement into the “low $70,000’s range” as the market adjusts.
BTC/USD, 1-day chart. Source: TradingView/Cointelegraph
Despite this, the analyst shared with Cointelegraph that a significant drop below $75,000 appears unlikely, stating:
“While there might be a temporary pullback as the market corrects for gaps left during the rapid ascent, Bitcoin is more poised to establish solid support in the $72,000 to $80,000 range.”
“This support could lay the groundwork for a more sustained recovery, making a deeper retracement less probable,” he added.
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Other analysts have also forecasted that Bitcoin may bottom out around $70,000 in early 2025 before entering the next phase of its rally.
Based on its relationship with the global liquidity index, Bitcoin’s right-hand side (RHS), indicating the lowest bid price a seller will accept, may dip below $70,000 by the end of February, following a peak of nearly $110,000 in January.
Source: Raoul Pal
Raoul Pal, founder and CEO of Global Macro Investor, was the first to warn of a potential drop to $70,000 back in November, also predicting Bitcoin would achieve a “local top” over $110,000 in January prior to the current correction.
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Crypto investor sentiment drops to 2022 low
While analysts are optimistic that Bitcoin will hit its bottom and begin a recovery in the near future, the broader cryptocurrency market continues to be constrained by low investor confidence.
The Crypto Fear & Greed Index, which gauges overall market sentiment, has fallen to a near three-year low of 20, a level last seen in July 2022, according to data from Alternative.me.
Source: Alternative.me
The last time sentiment plummeted to these levels was just a month after Bitcoin dipped to $17,500, seeing a monthly decline exceeding 37% in June 2022.
BTC/USD, 1-month chart. Source: TradingView
The drop in investor sentiment has been attributed to a variety of external and crypto-specific factors, as noted by Bitfinex analysts in a discussion with Cointelegraph, who mentioned:
“The combination of a steep Bitcoin price drop, regulatory pressures, security breaches, and plummeting altcoin values has induced extreme fear within the crypto market.”
“Although not directly measured by the index, we are frequently observing record highs in long liquidations across numerous sell-offs, such as those on February 3rd and the recent decrease from February 24-27,” the analysts added.
Additionally, the wider cryptocurrency market is still on its path to recovery following the $1.4 billion Bybit hack that took place on February 21, marking the largest heist in crypto history.
In a positive development for the crypto sector, Bybit has continued processing customer withdrawals and managed to entirely recover the stolen $1.4 billion in Ether by February 24, just three days post-attack.
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