Is Bitcoin Headed for Another Crash? Key Signs to Watch

BTC Faces Resistance at $84K Amid Weak Demand - Could Prices Drop Further?

Bitcoin briefly surged to $83,700 during the early Asian trading hours on March 12, rebounding from a low of $76,600 just a day prior. However, BTC remains under pressure, struggling to break past the $84,000 resistance level. This has left many wondering: Is another downturn on the horizon?

Weak Demand Signals Trouble for Bitcoin

One of the key factors behind Bitcoin’s recent struggles is the continued outflow from spot Bitcoin exchange-traded funds (ETFs). Since late February, these outflows have exceeded $1.5 billion, dampening market sentiment and suggesting that institutional interest may be waning.

Adding to the concern, Bitcoin’s "apparent demand" - a measure of new supply versus long-term holding trends - has taken a significant hit. Data from CryptoQuant shows that after surging in late 2024 following Donald Trump's election victory, Bitcoin’s apparent demand has plummeted from 279,000 BTC in early December to just 10,000 by late February.

Even more concerning, this metric turned negative on February 27 for the first time since September 2024 and currently sits at -93,700 BTC. If this trend continues, Bitcoin could face further price declines, similar to what happened in July 2024, when BTC dropped 30% after apparent demand hit similar levels.

That said, history shows this metric isn't always a guaranteed predictor of further downside. It was negative in both May and October 2024, yet Bitcoin still managed to rally by 7% and 73%, respectively.

Bitcoin Valuation Metrics Point to a Deeper Correction

Despite Bitcoin’s recent recovery from its four-month low of $76,600, several key valuation indicators suggest more downside could be ahead.

The Bitcoin bull-bear market cycle indicator, which measures momentum by comparing the P&L Index to its 365-day moving average, is at its most bearish level of this cycle. Currently, it sits at -0.067, the lowest since May 2023 - right before Bitcoin began a strong recovery.

Similarly, the MVRV ratio Z-score, which assesses whether Bitcoin is overvalued or undervalued, has dropped below its 365-day moving average. This suggests that Bitcoin’s recent upward momentum may be losing steam.

“Historically, valuation metrics at these levels have signaled either a sharp correction or the start of a bear market,” analysts warn.

Bearish Technical Patterns Suggest Bitcoin Could Drop to $68,400

From a technical analysis standpoint, Bitcoin is currently trading within a "bear flag" pattern - a bearish continuation setup that often signals further downside if key support levels fail.

This pattern emerged after Bitcoin tumbled from $92,000 to a local low of $76,600 between March 6 and March 11. BTC has since been consolidating within an ascending parallel channel, with $82,000 acting as a crucial support level.

If Bitcoin breaks below this level, another sharp decline could follow. Based on the height of the previous drop, the bear flag’s downside target sits around $68,400 - a 17% drop from current levels.

CryptoQuant analysts also warn that if the broader support range between $75,000 and $78,000 fails to hold, Bitcoin could plummet even further, potentially reaching as low as $63,000.

What’s Next for Bitcoin?

While Bitcoin has shown resilience in the past, current market conditions suggest caution. Weak demand, bearish valuation metrics, and a concerning technical setup all point to the possibility of further downside.

That said, Bitcoin has a history of defying bearish signals and surprising investors. Whether this time is different remains to be seen - but for now, traders should keep a close eye on support levels and prepare for potential volatility ahead.