Main reasons for this decline:
1. Global economic conditions
Strengthening US dollar: The strengthening dollar has led to reduced global liquidity. Since Bitcoin is considered a risk asset, the decrease in liquidity availability puts downward pressure on it. When the dollar strengthens, investors often shift capital into safer assets, such as government bonds, rather than cryptocurrencies.
Macroeconomic instability: Inflation expectations, geopolitical conflicts, and overall uncertainty in the global economy have increased market volatility. These factors prompt investors to avoid risks, negatively impacting Bitcoin's price.
2. Regulatory and political factors
Regulatory uncertainty: Recent changes in the policies of major economies, such as the USA and Japan, have raised concerns among investors. For example, Japan is discussing tax breaks and potential approval of spot Bitcoin ETFs, but the lack of clarity creates mixed expectations. In the USA, the new presidential administration after the elections has raised concerns about trade wars, which could destabilize global markets and impact Bitcoin.
Market pressure: Regulatory measures or even rumors about them can sharply change market participants' sentiments, leading to sell-offs.
3. Market sentiment and investor behavior
Retail investors: The rapid price drop has caused panic among retail Bitcoin holders, many of whom have started selling their assets, intensifying the downward movement.
Institutional players: Hedge funds actively using arbitrage strategies (e.g., the difference between futures and spot prices) have begun to unwind their positions in Bitcoin ETFs. This led to significant capital outflows from these funds, further driving down the price. Estimates suggest that up to 55% of the inflow into Bitcoin ETFs could be related to such short-term strategies rather than long-term investments.
4. Technical analysis
Breaking key support levels: From a technical standpoint, Bitcoin has fallen below important support levels, indicating a continuation of the bearish trend. However, some indicators, such as the RSI (Relative Strength Index), suggest that the market may be oversold, which sometimes precedes a short-term bounce.
Bitcoin price forecast
Short-term perspective (next few months)
Current correction: The decline is likely to continue until March or April 2025. Potential support levels are in the range of $75,000–$80,000. If Bitcoin holds at these levels, and investor sentiment improves (for example, due to positive regulatory news or stabilization of the economy), a short-term bounce may be possible.
Risks: If macroeconomic issues worsen (strengthening dollar, new trade conflicts) or regulatory pressure increases, the price may temporarily fall below $75,000.
Long-term perspective (2025 and beyond)
Optimistic forecast: Despite the current downturn, Bitcoin's long-term prospects remain positive. Analysts forecast a rise to $160,000–$200,000 by the end of 2025. This scenario is based on several factors:
Institutional adoption: Increased participation of major players (asset managers, corporations) will create sustainable demand.
Regulatory clarity: Approval of spot Bitcoin ETFs in key countries such as the USA and Japan will enhance the asset's availability and legitimacy, attracting new capital.
Macroeconomic trends: Bitcoin may strengthen its position as a hedge against inflation and currency devaluation, especially if central banks move towards a more accommodative monetary policy.
Growth conditions: To realize this scenario, the current correction must end, and global markets must stabilize.
Conclusion
The decline in Bitcoin's price below $80,000 is due to a complex combination of factors: strengthening of the dollar and reduced liquidity, uncertainty in regulation, panic selling by retail investors, and hedge funds exiting arbitrage positions. In the short term (March–April 2025), continued volatility is expected, with potential testing of $75,000–$80,000 levels, but chances for a bounce exist if conditions improve. In the long term (by the end of 2025), Bitcoin retains growth potential to $160,000–$200,000 due to institutional interest, possible regulatory improvements, and its role in the global economy. Investors should exercise caution in the coming months but remain optimistic about the asset's future.