Bitcoin once dropped below 72,000. How much faith remains in the crypto community?

Bitcoin falls below the $72,000 mark, bringing the “faith” issue in the crypto market to the forefront. Against the backdrop of a sharp decline in global risk appetite, investors are reassessing Bitcoin’s role amid market turbulence, and the safe-haven narrative of crypto assets is being questioned.

According to Bloomberg, Bitcoin briefly dropped to $71,739 at the New York close on Wednesday, marking its first fall below $72,000 in about 15 months. Compared to its peak in October last year, Bitcoin has retraced over 42%, with a year-to-date decline of approximately 17%, falling to its lowest level since November 6, 2024.

This decline is no longer just an internal de-leveraging within the crypto market but is driven by broader cross-asset pressure. On Wednesday, global markets experienced synchronized sell-offs, with the Nasdaq 100 index falling over 2%. Sectors more sensitive to interest rates, such as software and chips, generally came under pressure, dragging Bitcoin lower.

On the emotional level, a “crisis of faith” is forming. Shiliang Tang, Managing Partner at Monarq Asset Management, said the market is experiencing a “crisis of faith.”

Andrew Tu, Head of Business Development at Efficient Frontier, stated that crypto market sentiment is already in a state of “extreme fear.” If the $72,000 level is lost, Bitcoin could drop to $68,000 or even retreat to the low range before the initial rebound in early 2024.

According to Polymarket, there is an 83% probability that Bitcoin will fall to $65,000 this year, and the probability of dropping below $55,000 has risen to about 59%.

Risk appetite shifts sharply, with Bitcoin regarded as a “high-volatility risk asset”

Bloomberg reports that the selling pressure on Bitcoin on Wednesday was related to broader cross-asset tensions rather than solely driven by internal crypto liquidation. This is significant for investors, as Bitcoin did not show resilience independent of risk assets during the synchronized sell-off phase; instead, it behaved more like a high-volatility tail risk asset.

The Nasdaq 100 index fell over 2% that day, with the decline spreading to sectors like software and chips. Bitcoin also broke through a key round number on the same trading day, reinforcing its market perception as resonating with risk appetite.

From a peak-to-trough decline of 42%, the crypto market has evaporated over $460 billion in one week

Price retracement is rapidly transmitted through market capitalization contraction. Data from CoinGecko shows that the total market cap of crypto assets has shrunk by approximately $1.7 trillion since last October’s peak. In just the past week, the crypto market’s total value has decreased by over $460 billion.

As the largest crypto, Bitcoin’s decline in magnitude and speed has an “anchoring effect” on market sentiment. When Bitcoin’s year-to-date decline widens to about 17%, risk control, margin management, and redemption pressures tend to rise simultaneously, further amplifying overall volatility.

How the “crisis of faith” emerges: from forced liquidations to emotional breakdown

Market participants’ statements indicate that emotional shifts are becoming a core variable. The “crisis of faith” mentioned by Shiliang Tang refers to a simultaneous wavering among investors regarding the long-term narrative and short-term pricing mechanisms of crypto assets.

More critically, the change driven by the decline itself is noteworthy. According to Bloomberg, earlier declines were mainly driven by crypto-specific liquidations, while Wednesday’s pressure stemmed from broader cross-market tensions.

This means that even if internal leverage within the crypto market has been cleared, as long as external risk assets remain under pressure, Bitcoin may still lack the catalysts for an independent rebound.

$72,000 as a short-term watershed, market bets on a decline to $65,000 within the year

Several traders consider $72,000 as a key short-term level. Andrew Tu pointed out that if this level cannot hold, Bitcoin is “very likely” to drop to $68,000 and may return to the low range before the initial rebound in early 2024.

According to Polymarket, there is an 83% chance that Bitcoin will fall to $65,000 this year, and the probability of dropping below $55,000 has risen to about 59%.

Market liquidity signals also show volatility. Bloomberg data shows that US-listed Bitcoin spot ETFs recorded about $562 million in net inflows on Monday, but on Tuesday, it turned into a net outflow of $272 million, indicating that incremental funds are unstable.

Amid price declines and fluctuating capital flows, skepticism about Bitcoin’s role as a “pressure period safe-haven asset” is increasing.

Risk Warning and Disclaimer

        The market carries risks; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk.