Bitcoin experienced wild fluctuations this Tuesday, plunging to its lowest level since November 2024 before staging a robust recovery. The world’s largest cryptocurrency slipped to $72,900 during early U.S. trading hours, marking a significant decline from its recent zenith. However, it later rebounded to $76,800 as positive news broke concerning the government shutdown.
The sudden recovery follows Congress’s approval of a bill aimed at ending the partial shutdown of the federal government, with the House passing the funding bill by a narrow vote of 217 to 214. It now awaits President Trump’s signature to become law.
The turmoil surrounding the government shutdown was initially sparked on January 31, when the House failed to pass the bill in a timely manner, despite earlier support from the Senate on January 30.
Market Relief Amid Tech Sector Developments
The market’s recovery was further bolstered by remarks from Nvidia CEO Jensen Huang on CNBC. Huang quickly dismissed concerns regarding any friction between Nvidia and OpenAI, stating, “There’s no controversy at all. It’s complete nonsense,” while reaffirming Nvidia’s commitment to invest in OpenAI’s next funding round. His reassurance helped alleviate fears surrounding the stability of OpenAI and reignited confidence in the AI-powered tech sector, which had previously influenced market sentiment.
Despite the brief recovery, the volatility caused substantial damage within the crypto markets, with liquidations across digital asset derivatives totaling a staggering $740 million within a 24-hour window. Notably, $287 million in Bitcoin longs and $267 million in Ethereum longs were liquidated as traders reacted to the tumultuous price action.
As a result of the sharp decline, nearly 44% of Bitcoin’s supply is now underwater, leading to a concerning shift in the market. Analysts have noted that this dip pushed the “supply in profit” down from 78% to just 56%, suggesting that weak hands may continue to exit positions under pressure.
Technical Analysis and Future Outlook
The recent downturn has effectively wiped out all gains that Bitcoin had achieved since election night in November 2024, with the cryptocurrency now facing significant resistance levels. Observations from Glassnode revealed a concerning dynamic as Bitcoin’s Relative Strength Index (RSI) rests perilously close to the oversold territory, a level not encountered since the bearish market conditions of 2022.
Previous bear markets also coincided with midterm elections in the U.S., prompting some analysts, including Benjamin Cowen from Into The Cryptoverse, to warn that failure to bounce back quickly from these lows may result in extended bearish conditions. Cowen emphasizes that historical patterns suggest the potential for a relief rally, stating that overwhelming bearish sentiment could trigger countertrend movements.
In lighter news, Polymarket data currently indicates a 61% chance that Bitcoin will dip to the $70,000 mark by the end of the month, while confidence in reaching $90,000 has plummeted to just 18%. Analysts remain cautiously optimistic, with expectations for Bitcoin to recover from the $70,000 to $74,000 range, despite ongoing market volatility.
As Bitcoin continues to navigate this turbulent landscape, market participants will closely monitor the developments in Washington and ongoing sentiment in the tech sector to gauge the possible trajectory of the cryptocurrency’s performance in the coming weeks.
