Bitcoin (BTC) has given up its recent gains, plunging below the $60,000 level during the morning hours of the U.S. trading session on Wednesday. The world's largest cryptocurrency briefly fell as low as $59,888, marking its weakest price since early March and a decline of more than 18% from its all-time high of $73,797 reached on March 14. The drop comes ahead of a highly anticipated code update in Bitcoin, known as the halving, which is set to take place as soon as Friday.
The weakness in Bitcoin's price has echoed through most crypto markets, with all CoinDesk Market Index (CMI) sectors in the red and the broad-market CoinDesk 20 Index losing 1.8%. Ether (ETH), the second-largest crypto asset by market capitalization, tumbled below $3,000, declining 2.5% over the same period. Other smaller tokens, such as Solana and Dogecoin, also experienced significant slumps on Wednesday.
The current pullback in cryptocurrencies is being viewed as a cool-off phase following a multi-month rally that peaked last month. Bitcoin investor behavior suggests that the market weakness could continue for a while, as large investors have not yet started to buy the dip at current prices, according to Joel Kruger, market strategist at LMAX Group.
"The latest blockchain data shows large holders of bitcoin holding off on increasing exposure into the current dip, which suggests we could still see some more weakness or consolidation before bitcoin is ready to turn back up," Kruger said in a Wednesday market update.
The crucial technical level to watch for BTC is $59,000, which refers to a significant support zone where prices rebounded twice through March. "If bitcoin can hold above this level, it keeps the direct focus on that next push to a fresh record high and towards $100,000," Kruger added. "If on the other hand we see more downside pressure that translates to a breakdown below $59,000, this will delay the short-term bullish outlook and open the door for a more meaningful correction into the $45,0000-50,000 area."
The quadrennial halving event, which reduces the supply of new tokens from the blockchain, has long been considered a positive catalyst for Bitcoin prices. However, concerns over whether the halving is already priced in, coupled with a risk-off investment environment, have prompted an extended rout in the cryptocurrency market.
"People are looking to derisk as it remains to be seen if the halving will be a market moving event or a non-event overshadowed by the ETF," said Nathanaël Cohen, co-Founder at INDIGO Fund. "There is an additional macro factor putting more pressure on risk assets (the Middle East tensions)."
The decline in Bitcoin over the last week was accelerated by a wave of liquidations in long positions for digital assets, with about $780 million worth of bullish crypto wagers liquidated within 24 hours last Friday. The cryptocurrency saw further decline as some investors turned risk-averse amid Iran's attacks against Israel.
Despite the recent pullback, some market participants remain bullish on Bitcoin's long-term outlook, particularly with the leverage in crypto flushed out in the latest rout. "FalconX continues to see longer dated call buying across our derivatives desk as our clients are expecting higher prices in the second half of the year," said Ravi Doshi, head of markets at the prime broker.
