US President Donald Trump’s surprise nomination of former Federal Reserve Governor Kevin Warsh as the next Federal Reserve chairman boosted the dollar, undid the rally in precious metals and is pushing bitcoin below a key support level.
On-chain data shared by Glassnode shows that bitcoin was consolidating just above key structural support around $83,400, the lower bound of its cost basis model for the short-term holder.
A break below that zone could open the door to a deeper fall towards $80,700, the so-called real market average.
That collapse is happening. During the last 7 days bitcoin It lost more than 9.2% of its value and is now trading at $81,200.
The broader market, as measured by the CoinDesk 20 Index (CD20), lost 12.4% of its value during that period. That has meant that the Crypto Fear & Greed index fell to “extreme fear” for the week.
The Glassnode report notes that supply from short-term holders remained at a loss with BTC above that level remaining at 19.5%, well below the 55% capitulation threshold, suggesting some resilience despite the downward pressure. However, buyers’ conviction is being tested as prices decline.
On the derivatives side, funding rates remain low, pointing to a cautious speculative appetite. Options markets are pricing in increased demand for downside protection, with traders’ gamma turning negative below $90,000. That increases the risk of volatility spikes if support is broken.
Taken together, the data paint a picture of a fragile but not yet bankrupt market. Liquidity remains the key variable.
The cryptocurrency market may currently be in the grip of fear, but that could be a good sign.
According to cryptoanalysis platform Santiment, sentiment in several cryptocurrency communities has plummeted to extreme lows, levels that have historically preceded price recoveries.
In a report, Santiment highlighted the rise in bearish comments on social media as a rare bright spot in an otherwise bearish environment.
“While network fundamentals are stagnant, crowd sentiment has reached extreme levels of negativity,” the firm wrote. “Historically, this excessive downtrend is a strong contrarian indicator that a local bottom could be near.”
While prices have been falling over the past few months, long-term bitcoin holders are selling at the fastest pace since August. Cryptocurrency prices fell during the week, apparently due to the reversal of the US dollar’s decline.
However, some industry observers say the current mood may be short-lived.
Bitwise CIO Matt Hougan recently joined CoinDesk’s Markets Outlook, where he said cryptocurrencies are in the late stages of a bear market. Historically, crypto markets have tended to move in the opposite direction of the crowd, the report notes.
