Bitcoin fell sharply on Wednesday, dropping more than 6% in 24 hours. The price briefly dipped into the lower $83,000 range. The decline happened quickly late in the day and passed support levels without buyers reacting immediately.
This happened when three major risks occurred simultaneously: increased tensions between the USA and Iran, expectations of a U.S. government shutdown, and a severe winter crisis putting pressure on infrastructure across North America.
Geopolitical concerns returned after Washington issued new warnings against Tehran and Iran showed readiness to respond strongly in the event of military conflict.
Maritime movements in the Middle East and threats of new sanctions have worried many, especially when diplomatic channels are already strained.
Markets tend to see the first phase of a geopolitical crisis as a risk and not a protection.
For Bitcoin, this often means that investors reduce risk in the short term. This is more noticeable when leverage is high and the market is thin.
At the same time, more investors expect a shutdown of the US government, as negotiations over funding have stalled ahead of an important deadline.
If a solution is not reached at the last moment, several authorities may face problems. This can halt payments and create short-term uncertainty.
Previously, Bitcoin has dropped significantly during the last three government shutdowns, by as much as 16%.
Traders usually first reduce their holdings and delay decisions, especially when weak demand is already visible in the market.
A severe winter storm continues to cause problems in large parts of the USA and Canada, leading to power outages, traffic delays, and straining infrastructure.
Weather rarely affects Bitcoin directly, but makes investors even more cautious, especially amidst other concerns like politics and the economy.
In this case, the storm makes the market more cautious, but does not directly affect Bitcoin's network or mining.
Price signals show forced selling
Bitcoin's intraday chart shows a slow decline followed by a sharp dip late in the day. The fact that the price did not recover quickly suggests that forced sales and stop-loss orders pressured the price, not regular sellers.
This price development often occurs when liquidity is insufficient to meet rapid selling pressure. It is often linked to weaker demand in the spot market.
A significant change is visible in US spot ETF flows for Bitcoin. So far this year, ETFs have net sold about 4,600 BTC, compared to net purchases of nearly 40,000 BTC during the same period last year.
This is important, as ETFs previously provided the most buying demand in this cycle.
When this support decreases, rallies struggle to hold, and declines deepen, as fewer buyers take over the supply.
Decreased demand from retail threatens market stability
Data from the blockchain shows that transactions between 0 and 10,000 USD have decreased significantly in the past month. This not only means lower accumulation but also that smaller investors are less active.
The market can cope with a temporary absence of small investors, but if it continues, an important support factor disappears.
Together with ETF outflows, the market becomes more dependent on short-term traders and leverage, which increases volatility.
Despite the selling, the percentage of bitcoin at a loss is relatively low compared to historical levels. Most investors still have unrealized gains, which often precedes further declines rather than a bottom.
When the price drops to areas where more owners incur losses, selling pressure may increase. Then sentiment changes and risk tolerance decreases.
Are these events causing the sell-off – or do they indicate weaknesses?
The data points to the latter. Tensions between the USA and Iran, as well as concerns about a shutdown, have likely accelerated risk reduction. But ETF outflows and decreased investor interest show that the market was already vulnerable.
Macroeconomic shocks do not seem to create new weaknesses but instead reveal structural weaknesses that have been underlying.
What the charts show for the coming week
If demand does not increase, Bitcoin may continue to show erratic movements with weak gains. For a recovery to hold, ETF flows must improve or interest from individuals stabilize.
If the price clearly falls below the recent lows, a new wave of forced selling may start.
Right now, Bitcoin's development seems less dependent on headlines and more on whether demand increases before volatility forces a new restart.