Bitcoin sold off sharply on Wednesday, falling over 6% in 24 hours and briefly dipping to a low of $83,000. The decline happened quickly late in the trading session, and the price broke through intraday support levels without significant buying interest.
The movement comes at the same time as three macro-related risks converge: rising tensions between the USA and Iran, increased fears of a shutdown of the American state, and a severe winter crisis that strains infrastructure across North America.
Geopolitical risk returned after Washington issued new warnings against Tehran, while Iran signaled that they are ready to respond forcefully to any military escalation.
Marine movements in the Middle East and new threats of sanctions have increased concerns about miscalculations, particularly as diplomatic channels are strained.
Markets typically interpret the early phases of geopolitical escalation as a signal of lower risk appetite – not as a hedging opportunity.
For Bitcoin, this often leads to short-term risk reduction, especially when leveraged positions are high and liquidity is low.
At the same time, investors are increasing the likelihood of a shutdown of U.S. authorities as budget talks stall just before a critical deadline.
Without a last-minute agreement, several federal agencies may face operational disruptions, delayed payments, and poorer economic predictability in the short term.
Historically, Bitcoin prices have fallen noticeably during the last three shutdowns, with losses of up to 16%.
In practice, traders often reduce exposure in advance and reassess the situation later, especially in markets where demand is already weakening.
A powerful winter storm continues to hit large parts of the U.S. and Canada, causing power outages, transportation delays, and pressure on infrastructure.
Although weather events are rarely the main driving force behind Bitcoin prices, they contribute to increased risk aversion when they come on top of geopolitical and economic turmoil.
In this case, the storm seems more like a reinforcing factor that supports a defensive market sentiment rather than affecting Bitcoin's network or mining directly.
Price movement signals forced selling
Bitcoin's intraday chart shows a prolonged decline followed by a sharp drop late in trading. The absence of a strong rally suggests that the movement was due to less discretionary sellers, and more from forced position adjustments such as liquidations and triggered stop-losses.
Such price movements usually occur when liquidity is too weak to absorb sudden selling pressure, which closely correlates with weakened spot demand.
One of the most important structural changes can be seen in U.S. spot Bitcoin ETF flows. So far this year, the ETFs have net sold about 4600 BTC, compared to a net inflow of nearly 40,000 BTC in the same period last year.
This change is significant because ETFs have been the most consistent source of spot demand in this cycle.
When this purchasing power weakens, rallies struggle to maintain momentum and downturns become more severe, as fewer buyers step in to absorb the supply.
Reduced demand from private investors weakens market stability
On-chain data tracking transactions between $0 and $10,000 shows that private demand has fallen sharply over the past month. This not only indicates slower accumulation but also lower participation from smaller investors.
Markets can tolerate the temporary absence of individuals, but prolonged downturns remove an important stabilizing force.
Combined with ETF outflows, the market is becoming increasingly reliant on short-term traders and leverage, which amplifies volatility.
Despite the wave of selling, Bitcoin's supply-in-loss metric remains relatively low compared to historical levels. This means that most owners are still sitting on unrealized gains, a state that often precedes further declines rather than marking a bottom.
When the price falls into zones where more of the holdings are at a loss, selling pressure can increase as sentiment shifts and risk tolerance tightens.
Are these events the cause of the sell-off – or do they reveal weaknesses?
The data suggests the latter. Tensions between the U.S. and Iran, as well as fears of a shutdown, have likely acted as catalysts and accelerated risk reduction. Nevertheless, ETF outflows and faltering demand from private investors point to a market that was already vulnerable.
Instead of creating new weakness, it appears that macro shocks have revealed a structural fragility that has long been building beneath the surface.
What the charts suggest for the upcoming week
If demand conditions remain unchanged, Bitcoin may still experience volatile price movements with weak rallies. Any potential increase must be supported by an improvement in ETF inflows or stabilization in retail investor demand to maintain upside.
On the downside, a clear break below the recent lows could trigger a new wave of forced selling.
For now, Bitcoin's development seems less dependent on headlines and more on whether underlying demand returns before volatility leads to a new correction.