Bitcoin Slides to 16-Month Low as ETF Overhang Deepens Crypto Selloff

Gerik

Summary:

Bitcoin plunged below $64,000, reaching its lowest level since October 2024, as accelerating losses exposed heavy ETF overhangs, fading policy optimism, and a broader crisis of confidence across crypto markets.....

A Steep Breakdown Below Key Levels

Bitcoin fell more than 13% in a single session, breaking below the $64,000 mark and extending a sharp selloff that has erased nearly half of its value from last year’s all-time high. The move wiped out all gains accumulated since the start of Donald Trump’s second term, reversing earlier optimism that a crypto-friendly administration would underpin digital asset prices.

The latest decline reflects an acceleration rather than an isolated shock. Bitcoin is now down roughly 27% year to date, marking its fourth consecutive monthly loss in January and confirming that downside momentum has become entrenched.

Policy Signals And The Vanishing Safety Net

Selling pressure intensified after U.S. Treasury Secretary Scott Bessent stated that the federal government has no authority to buy Bitcoin or instruct banks to support the crypto market. That clarification removed lingering expectations of a policy backstop, reinforcing the perception that digital assets sit fully outside the traditional financial safety net.

This policy signal acted as a catalyst rather than the root cause. The market reaction highlights a causal link between perceived government support and risk appetite. Once that assumption was stripped away, already-fragile sentiment deteriorated rapidly.

ETF Cost Bases Become A Structural Drag

According to 10X Research, Bitcoin remains locked in a broader bear-market structure, with downside risks still elevated. A key issue is the significant overhang of spot Bitcoin ETF holders who bought at much higher levels. Estimates suggest an average acquisition price near $90,000, leaving many investors deeply underwater.

A similar dynamic is unfolding in Ethereum-linked products. Ether sank more than 13% in the same session, with ETF investors facing losses of roughly 31% based on average cost bases. This creates a feedback loop where rallies are met with selling as investors attempt to reduce exposure, limiting the market’s ability to stabilize.

Narrative Breakdown And Investor Psychology

The speed of the decline has amplified psychological stress, particularly among newer participants who entered the market following regulatory approval of crypto ETFs. Unlike long-term holders accustomed to extreme volatility, this cohort was drawn in by institutional validation. The resulting losses have undermined confidence and reduced willingness to add fresh capital.

Prominent investor Michael Burry added to bearish sentiment, warning that a sustained decline could trigger a self-reinforcing downward spiral. He argued that Bitcoin has failed to function as a debasement hedge comparable to gold, instead behaving like a purely speculative asset vulnerable to sharp repricing.

Monetary Policy Expectations Add Pressure

The downturn has also coincided with rising sensitivity to U.S. monetary policy. The nomination of Kevin Warsh as the next Federal Reserve chair has been widely interpreted as hawkish, further dampening appetite for risk assets. For crypto markets, tighter financial conditions translate directly into lower tolerance for leverage and speculative positioning.

Despite the magnitude of the selloff, analysts caution that a durable bottom has yet to form. With positioning still stretched and no immediate catalyst to restore confidence, downside risks remain prominent. Until forced selling subsides and ETF-related overhangs are absorbed, Bitcoin’s trajectory is likely to remain volatile and biased lower.

The current episode underscores a broader lesson for crypto markets. Regulatory legitimacy and political support can widen access, but they do not shield prices from market cycles. As leverage unwinds and expectations reset, Bitcoin’s slide below $64,000 represents not just a technical break, but a deeper reassessment of risk across the digital asset landscape.

Source: Yahoo Finance

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