Since Bitcoin fell below the $90,000 mark on February 25, the crypto market plummeted across the board. Bitcoin fell below 79,000 today, setting a new low since November 12, 2024; Ethereum also fell below $2,100, and the price returned to the November 2023 level. As market sentiment continues to be in a state of "extreme panic", although Bitcoin and Ethereum have fallen so much, there are still no signs of stopping the decline, and the market is suffocating.

Worries about the US economic recession are intensifying

This dramatic adjustment in the market is directly related to the deterioration of the macro environment. As the U.S. economy shows signs of weakening, recession worries are back.

Data shows that consumer confidence in the United States fell sharply in February, with the largest decline since August 2021. Consumers are reducing various spending, and data released on Thursday showed that the U.S. sales index for existing home contracts in January fell 4.6% month-on-month, far exceeding expectations and hit a record low. In addition, retail giant Walmart's financial report expects performance growth to slow down significantly in fiscal 2026, which is an important weather vane for U.S. consumer spending, which has aroused investors' concerns about the consumption prospects.

At the same time, the pace of U.S. economic expansion slowed to near stagnation in February. This month, the US comprehensive PMI hit a new low in 17 months, with "business activity approaching stagnation." The even more pessimistic data is that the huge service industry activity, which is crucial to the US economy, hit a new low since January 2023, entering the contraction range for the first time in more than two years.

As a reflection of recession concerns, the 10-year U.S. Treasury yield is lower than the 3-month U.S. Treasury yield, and the yield curve is inverted, which has been a typical recession warning signal in the past few decades.

Series of weak macro data, coupled with Trump's confirmation that tariffs on Canada and Mexico take effect as scheduled, and threatening to impose taxes on the EU and more, constitute the core logic of the recent sharp rise in the US economy's "stagflation" expectations. Based on this, investors' risk appetite has dropped rapidly, US stocks have been sold for many consecutive days, and popular star technology stocks have plunged at high levels, with cumulative declines ranging from 10% to 35%. For example, Nvidia has fallen 14.18% this week, while Tesla, which is often regarded as a barometer of "Trump transactions", has fallen 20.18% this week. It has fallen by nearly 4 cumulatively since Trump reached its peak after being elected.0%.

Due to the strong correlation between Bitcoin and technology stocks, Bitcoin fell sharply simultaneously under the leadership of US stocks. In addition, the review process of US state-level Bitcoin-related bills has also begun to be blocked. The passage of the Bitcoin bill does not seem to be as smooth as the market imagines, which to a certain extent weakens the market's confidence in Trump's "Crypto-friendly" and Bitcoin reserve commitments.

Funds continue to withdraw

Since February this year, Bitcoin spot ETFs have experienced a serious "blood loss effect". As an important inflow channel for institutional funds, their capital flow data is also one of the key indicators that affect market confidence. However, throughout February, Bitcoin spot ETF funds were almost net outflows.

According to coinglass data, from February 18 to 27, Eastern Time, the U.S. Bitcoin spot ETF experienced net outflows for eight consecutive days. On February 25, the net outflow was as high as US$1.14 billion, setting the largest single-day net outflow record since its launch, reflecting the pessimistic expectations of institutional investors for short-term price trends.

On-chain data also shows that the liquidity of the Bitcoin market is also shrinking rapidly, especially the retreat of large funds. According to data from X's well-known big V Murphy, whales that dominated the market's rise in the past (trading amount is greater than US$10 million), from April 2023 to November 2024, their liquidity accounted for sharp declines after increasing from 30% to 62%, and by February this year, it has dropped to 38%. High net worth groups (transaction amounts of US$1 million to US$10 million) also reduced their holdings since January, with liquidity accounting falling from 36% to 30%. At the same time, the proportion of retail investors is increasing, which shows that when retail investors enter the market with Bitcoin exceeding $100,000 and continuing fomo sentiment, large funds are gradually withdrawing.

Further data show that the retreat of large funds is highly correlated with profit cashing. Whenever a wallet holding 10-100,000 BTC starts to make large profits, the upward trend of Bitcoin is coming to an end. This phenomenon was in 2017, 2021 and 2025 are clearly reflected, which is highly consistent with the time when whale funds are withdrawn. The current market is experiencing a typical model of capital flow: large funds leave the market by profit, and retail investors take over after realizing it.

Is it time to buy at the bottom?

The market continued to fall, with Bitcoin falling below $79,000, and it has plummeted by more than 18% in the past week. With a huge short-term decline, the market began to think about whether it was time to buy at the bottom.

At present, the cryptocurrency market is deeply trapped in a vortex of multiple adverse factors: the shadow of economic stagflation covers all risk assets, the selling wave of technology stocks has put downward pressure on Bitcoin through the risk preference transmission mechanism, and the internal capital structure of the crypto market is seriously imbalanced - institutional capital continues to flow out, whale accounts are accelerated to take profits, and retail investors' momentum is exhausted. These factors have jointly created the depth and fierceness of this decline. Historical lessons reveal that when market liquidity shifts from institutions to retail investors, it often indicates that the key critical point of bull and bear transformation is close. Although short-term oversolding may induce a technical rebound, with Trump's uncertainty, the uncertain prospects of the Federal Reserve currency, and the biggest positive for Bitcoin strategic reserves in the currency circle, investors should be highly vigilant about the risk of the "bottom-buying trap".

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