Bitcoin fell below the $67,000 mark early Wednesday, showing a 3.1% decrease to $66,804, reflecting the bearish atmosphere in cryptocurrency markets in reaction to new U.S. monetary policy hints. Similarly, Ethereum declined by 4.1% to settle at $1,965, while other prominent cryptocurrencies like XRP and BNB also faced declines of 4.3% and 4.5%, respectively.
This selloff was largely attributed to Kevin Warsh’s nomination as the Federal Reserve chair, which has stirred expectations of tighter liquidity and diminished prospects for interest rate cuts. Traders are now closely monitoring the support levels around $60,000 to $65,000 for signs of stabilization.
Vincent Liu, the Chief Investment Officer of Kronos Research, highlighted that the recent downturn has succeeded in clearing much of the excess leverage in the market. According to Liu, the derivatives data indicates that significant liquidation has occurred on exchanges, with many leveraged positions being unwound.
Institutional investors, according to Liu, appear to be adopting a cautious approach, staying on the sidelines as they await clearer catalysts that could stimulate larger re-entry into the market, such as sustained momentum in exchange-traded funds (ETFs) or fresh macroeconomic signals.
ETF Investment Gaining Momentum
On the ETF front, the enthusiasm for spot Bitcoin showcased notable growth, with $166.56 million in net inflows recorded on Tuesday, rising from $145 million the day prior. Concurrently, spot Ethereum ETFs brought in more modest inflows of $13.82 million, down from $57 million.
SkyBridge Capital’s founder, Anthony Scaramucci, expressed his conviction in the current Bitcoin dip, stating that his firm is actively buying Bitcoin at varying price points, including around $84,000, $63,000, and now the current lower range. Scaramucci likened buying into a declining market to “catching a falling knife,” a reminder that he acknowledges the risks involved as Bitcoin previously peaked beyond $126,000 in October.
Meanwhile, in broader market trends, Asian equities exhibited a favorable response on Wednesday, with South Korea’s Kospi gaining 1.24% by midday and Hong Kong’s Hang Seng index rising by 0.42%. Conversely, U.S. stock markets presented a mixed bag, with the S&P 500 declining by 0.33%, the Nasdaq Composite down 0.59%, and the Dow Jones Industrial Average managing a slight uptick of 0.1%.
Valuation Models Indicate Long-Term Potential
Valuation models for Bitcoin paint a nuanced picture for long-term investors, suggesting that the dip towards $60,000 may represent a discounted buying opportunity. Current measurements indicate Bitcoin’s realized price hovering near $55,000, while the shifted realized price rests around $42,000.
Historical analysis of price movements following the retests of the $60,000 mark historically show promising returns, indicating a potential upside of between 170% to 220%. This perspective aligns with price targets that point towards exceeding $150,000 in the next bullish phase.
Additionally, the power law quantile model places Bitcoin near the 14th percentile of its long-term price range, suggesting a phase of temporary undervaluation after failing to reach the previous peak estimate of $210,000 in 2025. The model indicates historical long-term floor levels now align between $50,000 and $62,000, coinciding with identified price accumulation zones.
As the market looks forward, traders will be eagerly awaiting Thursday’s vital U.S. labor market data, hoping it will offer clarity on interest rates and broader market risk appetite well into the future.
