Bitcoin sharply falls below key support, market panic may trigger deeper correction?

The cryptocurrency market has just experienced a turbulent weekend. Bitcoin's price suddenly dropped, briefly breaking below the critical psychological level of $78,000, hitting a new low since April. This sudden move not only liquidated a large amount of leveraged positions but also sparked intense discussions about whether the market is turning toward a deeper correction.

Liquidity depletion and weak demand double blow

Market analysts point out that this decline was not accidental. Multiple factors combined to cause this outcome:

Cooling corporate demand: The main driver that previously pushed Bitcoin higher—corporate buying demand (especially the continued accumulation by companies like MicroStrategy)—has shown signs of fatigue. The lack of new institutional buying support has made the market unusually fragile.

Liquidity contraction: As prices hover at high levels, market liquidity gradually weakens. When large sell orders appear, there is insufficient buy-side depth to buffer the decline, leading to an accelerated drop in price.

Chain reaction in the derivatives market: Falling below key levels triggered a large number of forced liquidations, creating a vicious cycle of “decline-liquidation-further decline.” Preliminary estimates suggest that total liquidations over the weekend have exceeded hundreds of millions of dollars.

Technical indicators turn bearish across the board, analysts warn of possible deeper correction

Senior market observer Eric Cronn points out that this decline could be the start of a larger correction. He analyzed several key signals:

Monthly MACD indicator: This long-term technical indicator experienced a rare death cross in November last year. Historically, such a situation often signals a sustained downward trend for several months.

Weekly EMA crossover: The 21-week and 55-week exponential moving averages recently completed a bearish crossover, a pattern that has typically been associated with significant market cap shrinkage in past cycles.

Annual chart warning: Bitcoin’s 2024 annual close formed a “shooting star” pattern, a classic reversal signal indicating that upward momentum may have been exhausted.

Options market shows: $75,000 becomes new focal point

Changes in market sentiment are especially evident in the derivatives market:

Put options surge: Traders are heavily buying put options with a strike price of $75,000, betting that prices will fall further. On Deribit, the notional value of these contracts has reached $1.16 billion, nearly matching the open interest of $100,000 call options.

Bullish sentiment recedes: In stark contrast, the optimistic bets on breaking above $100,000 are rapidly fading. Investors seem to be preparing for a more conservative price range.

Decoupling from traditional markets: Crypto assets sold off first

A noteworthy trend is the divergence between Bitcoin and traditional risk assets. While US stocks and other traditional risk assets remain relatively stable, cryptocurrencies led the decline. Cronn believes this behavior is very typical:

“When market concerns intensify, investors tend to sell the most volatile and speculative assets first. Cryptocurrencies, being at the far end of the risk curve, naturally become the first to be reduced.”

Deep correction target: $50,000-$60,000?

Some analysts believe that the current decline may just be the beginning. Cronn offers a more cautious forecast:

“Bitcoin may need to retreat to the $50,000-$60,000 range to establish a solid foundation again. This zone will shake out remaining speculative leverage and provide a more attractive entry point for long-term investors.”

It’s worth noting that the October “10/10” flash crash last year already cleared some market bubbles, but many traders remain cautious about re-accumulating at high levels. If prices continue to fall, further deleveraging could be triggered.

Long-term perspective: opportunities in the correction

Despite the seemingly bleak short-term outlook, experienced investors often look for opportunities amid market panic. Cronn himself said that if prices truly enter the $50,000-$60,000 range, he would consider increasing long positions.

“A healthy market requires periodic corrections to clear excessive speculation. For long-term holders, such adjustments may ultimately benefit the ecosystem’s sustainable development.”

For ordinary investors, the current market environment reminds us: the crypto market remains highly volatile. While chasing returns, risk management is more important than ever. The market is testing participants’ patience and conviction, and the coming weeks could determine the medium-term trend of Bitcoin.