Renewed macro uncertainty of yet another U.S. government shutdown and the resultant stalemate regarding the progress of the CLARITY Act have crippled Bitcoin and the broader crypto market. Most of the momentum we witnessed in the first two weeks of the year have now been stripped away. On top of this reset, Bitcoin is teetering on the edge of printing an unpleasant chapter in its history. For the first time since 2018, Bitcoin is close to printing a fourth straight red month. As the month draws to an end, traders are eyeing the $87.8K mark for BTC, as a close below this level would effectively confirm that outcome. A Rare Historical Pattern Emerging Bitcoin bull market corrections or drawdowns are not an uncommon phenomenon. In fact, when we look at history, the current correction of around 30% from the highs set in October last year sits well within the range of past bull-cycle corrections. We’ve actually seen steeper ones like in the 2021 bull cycle before the uptrend ultimately resumed. What stands out, however, is how rarely Bitcoin has printed four consecutive monthly red candles. Notably, the last time this happened in 2018, Bitcoin did not end its streak of red months with the fourth. Instead, Bitcoin went on to see a further ~20% decline with two more red months. A similar setup played out in 2015, where losses ultimately approached close to 60% after the four month red streak. The takeaway is not that history must repeat, but that risk asymmetry increases around these inflection points. A fourth monthly red candle followed by confirmations such as steeper downside momentum, low volume and on-chain selling pressure would ultimately question the bull thesis. How Today Differs From 2018 The reason why history need not play out identically is because context matters. The dynamic and nature of Bitcoin as an asset class is completely different from what it was in 2018 and more so compared to 2015. Apart from being a much bigger asset in sheer market capitalization, which alone requires more capital to influence price, the composition of market participants has shifted meaningfully. For over a decade, Bitcoin was primarily front run by retail participants. That dynamic has categorically shifted with the introduction of spot Bitcoin ETFs, the expansion of institutional grade derivative markets and the maturation of liquidity and custody infra. The entry of some of the largest investment firms in Blackrock, Fidelity and others has anchored BTC deeper into traditional capital markets. At the same time, Public Bitcoin treasury companies entering the fray have added a new structural layer to Bitcoin’s supply dynamics. They now collectively own 5.42% of the total supply. Taken together, rising institutional participation and the rise of regulated avenues to gain exposure have fundamentally changed how Bitcoin should be viewed. It is no longer a retail-led ecosystem and this shift alters the assumptions that once underpinned many historical price patterns. What Traders Are Watching Into Month-End As we approach month’s end, crypto sentiment has been oscillating between fear and extreme fear levels. Much of the bleak sentiment comes from the fact the macro uncertainties loom large but also by the sharp outperformance seen across other asset classes, particularly commodities. Right now, the line in the sand is the $87.8K mark. A close below here and BTC will print the fourth monthly red candle. Despite the downbeat outlook, follow through on volatility to the downside coupled with low volume will be the telltale sign of a move driven more by exhaustion than conviction.
