The price of bitcoin fell sharply on Wednesday, dropping to below $86,000 for the first time since mid-November.
Sentiment in the crypto market is "on the floor at this moment in time", says Simon Peters, crypto analyst at eToro.
He points to the 'crypto fear and greed index', which has dropped from a level of 55 (Neutral) to 21 (Extreme Fear) in less than a week.
"Bitcoin had been holding up relatively well until the $92,000 level – which had been holding as support since November 2024 – was broken. I suspect this caused a cascade of liquidations of positions to occur, adding further downside pressure on the price.
"If previous bull markets are anything to go by, the price could still drop further from here. We generally see retracements of 25-35% in bitcoin bull markets before a base is found and the next leg higher begins."
A 35% drawdown from all-time highs would give a price of $70,000.
Analysts at 21Shares said the year-to-date low came as total 'liquidations', ie when leveraged traditions positions are closed, exceeded $1.5 billion.
Several factors contributed to the sell-off, they suggested, including uncertainty around Donald Trump's tariffs and interest rates, leading to risk-off sentiment across financial markets, which has pushed gold to record highs.
Bitcoin ETF outflows have seen around $1 billion withdrawn since last Thursday, the 21Shares analysts said, driven by market-neutral holders reducing exposure in light of general market uncertainty and the Bybit hack fallout.
"While Bybit has filled in the hole, fears remain around forced selling pressure emanating from hacker’s holdings."
The 21Shares analysts reckon the sell-off opens up a "buying opportunity" for bitcoin, given the possibility of a US bitcoin strategic reserve and digital asset stockpile, along with potential altcoin ETF approvals for XRP, solana and others, which would allow broader institutional adoption and unlock fresh inflows.