Bitcoin (BTC) Range Play Above $90K Concludes Bearishly This Week, Dropping 12.6% in 3 Days

Bitcoin's (BTC) prolonged range play above $90K has concluded bearishly this week, and how?

Bitcoin (BTC) has seen a swift bearish correction this week, following a prolonged period of range-bound trading above the $90,000 level.

The cryptocurrency dropped 12.6% in the first three days of the week (according to UTC time), the largest such decline since November 2022, when the FTX bankruptcy unfolded, according to data from TradingView.

The sell-off comes as investors are growing increasingly disappointed over the lack of swift action from President Donald Trump's administration in creating the promised national Bitcoin reserve and tightening fiat liquidity conditions, as CoinDesk reported earlier this month.

Institutional demand for the largest cryptocurrency and its second-largest peer, ether (ETH), has weakened, pushing the CME futures market closer to backwardation, a market condition where spot prices are higher than prices for futures.

Nasdaq, the Wall Street's tech-heavy index, has also come under pressure, adding to Bitcoin's woes.

Now, the path of least resistance appears to be on the downside, as the Trump tariffs story could heat up again with the March 4 deadline for tariffs against Canada and Mexico approaching. The first shots fired earlier this month had already led to a broad-based risk-off mood.

However, bulls shouldn't pin their hopes on Friday's core PCE

Those pinning hopes on Friday's U.S. "core" Personal Consumption Expenditures (PCE) index – the Fed's preferred inflation measure – to put a floor on risk assets might face disappointment, according to Noelle Acheson, author of the "Crypto is Macro Now" newsletter.

The core PCE, which excludes the volatile food and energy components, is expected to have risen 2.6% year-on-year in January, down from December's 2.8%, according to FactSet's consensus estimates quoted by Morningstar. Typically, slower inflation is associated with a greater probability of Fed rate cuts and risk-on.

But this time around, markets could look past the expected soft reading and focus on the ongoing uptick in the forward-looking inflation metrics. For instance, the Conference Board's consumer confidence for February released this week showed a surge in one-year inflation expectations to 6% from 5.2%. That's quite a jump. The two- and five-year inflation swaps have also been rising, as CoinDesk reported earlier this month.

According to Acheson, that could be seen by markets as a sign of economic weakness.

"Anyway, even if the PCE comes in softer than forecast, it could be taken as confirmation of slowing growth, sending markets into another whirlwind of concern," Acheson said in Wednesday's edition of the newsletter shared with CoinDesk.

"So, this bad mood is largely macro-driven," Acheson added, highlighting her concerns over tariffs, high corporate valuations and overexposure of portfolios to AI.

However, Acheson believes crypto could soon find its footing, thanks to Bitcoin's dual appeal as a risk asset and a haven, similar to digital gold.

"For most portfolios, the risk-asset/safe haven duality suggests that there is a price at which new longer-term investors will start to come in – this encourages traders to come back in, also," Acheson noted.

Potential support levels/demand zones

According to technical analysis theory, a downside breakout of a prolonged range play, as seen in BTC, usually leads to a notable drop, equivalent to the breadth of the range. In other words, the downside breakout of the $90K-$110K range implies a potential for a slide to $70,000.

"In a worst-case scenario, Bitcoin could drop to the $72,000-$74,000 range, where a rebound will likely occur," Markus Thielen, founder of 10x Research, said in a note to clients Wednesday, noting bitcoin's lagged correlation to the global central bank liquidity indicator.

That said, BTC rose to $86,000 at press time, having tested a supposed demand zone at around $82,000, suggested by Markus Thielen, founder of 10x Research, in Wednesday's client note.

According to Thielen, the potential demand zone is around $82,000, as suggested by an on-chain metric called the short-term holders' realized price – the average price at which addresses holding coins for less than 155 days have purchased their BTC.

"Historically, bitcoin rarely trades below this (short-term holders' realized price] level in bull markets for extended periods, whereas, in bear markets, it tends to stay below it for longer durations. During the summer 2024 consolidation, bitcoin dropped $9,616 below this metric, now at $92,800," Thielen