Bitcoin has experienced its second-deepest correction in the current bull cycle, shedding 30% from its all-time high of $109,590 recorded on January 20. The cryptocurrency plunged to $77,041 during the week of March 9–15 before rebounding slightly. According to Bitfinex analysts, the sharp decline was driven by selling pressure from short-term holders, defined as investors who acquired BTC within the past seven to 30 days.

In its latest market report, Bitfinex noted that these short-term holders were facing net unrealized losses, making them more likely to capitulate during downturns. The sell-off contributed to a broader market decline, with Bitcoin exchange-traded funds (ETFs) recording around $920 million in outflows during the same week. This indicates that institutional buyers have yet to return with sufficient strength to offset the wave of selling.

Signs of Recovery, But Institutional Demand is Key

After hitting its weekly low, Bitcoin staged a modest recovery, climbing 9.5% to trade around $84,357. However, analysts warn that the market’s next move will depend heavily on whether institutional investors step in at these lower levels. If large-scale buyers absorb the selling pressure, it could stabilize the price and pave the way for a potential rebound.

“While institutional flows and the macro situation are pivotal for market direction in the mid-term, statistically, a 30% drawdown has often marked the low before continuation higher,” Bitfinex analysts stated. They noted that if BTC consolidates around current levels, historical patterns suggest a strong recovery could follow, potentially pushing prices higher.

Macroeconomic Uncertainty Clouds Bitcoin

Beyond market-specific factors, the broader macroeconomic landscape is adding to Bitcoin’s volatility. U.S. consumer confidence recently dropped to its lowest point in two years, while inflation concerns continue to linger. The Federal Reserve’s latest model, released on March 4, predicts that the U.S. economy will shrink by 2.8% in the first quarter of 2025, adding further uncertainty.

Meanwhile, ongoing trade war discussions are also weighing on Bitcoin’s status as a potential safe-haven asset, keeping miners and investors on edge. Despite the recent announcement of a U.S. Bitcoin strategic reserve and plans to stockpile digital assets, market sentiment remains fragile.

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