Bitcoin was rapidly sold off on Wednesday, dropping more than 6% within 24 hours and hitting a low of around 83,000 USD briefly. This decline occurred swiftly towards the end of the market, breaking through the intraday support without immediate buying pressure.
This phenomenon occurs as three macro risks converge: increasing tensions between the U.S. and Iran, heightened speculation about a U.S. government shutdown, and a severe winter crisis that pressures infrastructure across North America.
Geopolitical risks have resurfaced after Washington issued a new warning to Tehran, while Iran has shown a willingness to respond with violence if military escalation occurs.
Naval movements in the Middle East and new sanction rhetoric have raised concerns about miscalculation, especially as diplomatic channels remain tense.
Typically, the market views the onset of geopolitical escalation as a risk-averse signal rather than a hedge.
For Bitcoin, this event often translates to short-term risk reduction, especially when high leverage is used and liquidity is thin.
Meanwhile, investors are increasingly assessing the risks of a U.S. government shutdown as budget negotiations stall ahead of critical deadlines.
If there is no last-minute agreement, several federal agencies may face operational disruptions, leading to delayed payments and reduced fiscal clarity in the short term.
Historically, Bitcoin's price has dropped significantly during the last three government shutdowns, falling by as much as 16%.
In practice, traders will reduce their risk exposure first and then reassess the situation, especially in markets showing signs of weakening demand.
Severe winter storms continue to cause disruptions in many areas of the U.S. and Canada, leading to power outages, transportation stoppages, and pressures on infrastructure.
Although weather is not often the main trigger for Bitcoin, when combined with geopolitical and financial tensions, it heightens global risk aversion.
In this case, the storm acts as a compounding factor more than anything else, as it reinforces the risk-averse atmosphere in the market instead of directly impacting Bitcoin's network or mining activities.
Price signals reveal necessary selling pressure.
Bitcoin's daily chart shows continuous deterioration before a sharp drop at the end of trading. The lack of a notable rebound suggests that this movement is driven by forced position adjustments, such as liquidations or stop-loss triggers, rather than voluntary selling.
Characteristics of this price pattern often emerge when liquidity is insufficient to support sudden selling, which is linked to weakening demand in the spot market.
The most significant structural changes appear in the cash flow of Bitcoin ETFs in the U.S. this year, with ETFs seeing a net outflow of approximately 4,600 BTC, compared to last year, which had a net inflow of around 40,000 BTC during the same period.
This change is significant because ETFs are a primary source of consistent spot demand in this cycle.
When buying pressure decreases, maintaining price recovery in the market becomes difficult, and the drop in prices intensifies as fewer buyers step in.
The contraction in retail demand impacts market stability.
Blockchain data tracking transactions between USD 0 and USD 10,000 shows that retail demand has contracted rapidly over the past month, indicating not only a slowdown in accumulation but also reduced participation from retail investors.
Although the market can cope with the short-term loss of retail participants, a prolonged contraction will erode this crucial support.
Combined with capital outflows from ETFs, the market increasingly relies on short-term traders and leverage, both of which exacerbate volatility.
Even as prices adjust downward, Bitcoin's supply indicators in a state of loss remain low compared to the past, meaning that most coin holders still have unrealized profits. This situation often occurs before further downturns and is not a signal of a bottom.
As prices drop into zones with greater supply than demand, selling pressure may increase as market sentiment shifts and risk tolerance narrows.
These events trigger selling or reveal weaknesses.
Data indicates that the tension between the U.S. and Iran and concerns regarding government agency shutdowns are likely catalysts for risk reduction, but capital outflows from ETFs and declining retail demand suggest that the market is already fragile.
Therefore, even without new weaknesses arising from macro factors, these events reveal a fragile structure that has accumulated beneath the surface of the market.
What does the chart indicate for the upcoming week?
If demand conditions remain unchanged, Bitcoin may continue to fluctuate and the recovery remains weak, with any rebound needing support from improved ETF inflows or a recovery in retail demand to maintain an upward trajectory.
Conversely, if prices drop below the recent lows, it could lead to another wave of forced selling.
Currently, the direction of Bitcoin seems to depend on whether fundamental demand returns before volatility forces a reset, rather than relying on headline news.