Bitcoin (BTC) is holding steady around $104,000 as of Friday, recovering from a mid-week dip that briefly pushed prices below $98,000. The rebound followed support at the 50-day Exponential Moving Average (EMA), signaling resilience in the face of broader market volatility. Despite short-term turbulence driven by macroeconomic shifts and tech sector jitters, historical data paints an optimistic picture for February—a month that has historically delivered strong returns for Bitcoin investors.
Market Reaction to Nvidia’s Dip and DeepSeek’s Rise
Early in the week, Bitcoin dropped to a low of $97,777, triggering widespread liquidations across the crypto market. According to CoinGlass, over **$860 million** in positions were liquidated on that day alone, with nearly $260 million attributed to BTC. This sharp correction coincided with a notable downturn in U.S. equities, particularly in tech stocks.
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A key catalyst was the unexpected plunge in Nvidia’s stock, which fell 17% following news of DeepSeek, a Chinese AI startup claiming to offer high-performance, cost-efficient large language models (LLMs). K33 Research highlighted in its "Ahead of the Curve" report that this development rattled investor confidence in U.S. tech dominance, leading to risk-off behavior across asset classes.
Bitcoin, while not immune, showed relative strength—dropping only 2.6% compared to the Nasdaq’s 3% decline. This underscores BTC’s evolving role as a digital asset increasingly correlated with traditional risk markets, yet still capable of outperforming during sell-offs.
Notably, CME Bitcoin futures saw premiums turn negative for the first time since August 2023, accompanied by a significant drop in open interest—down by 17,225 BTC. This suggests professional traders are de-risking amid uncertainty. However, with premiums now returning to slightly positive levels, sentiment may be stabilizing.
U.S. Macroeconomic Data Influences BTC Momentum
Midweek, Federal Reserve policy decisions provided a modest boost to Bitcoin. The Federal Open Market Committee (FOMC) held interest rates steady at 4.25%–4.50%, maintaining a cautious tone due to persistent inflation concerns. While the Fed acknowledged a resilient labor market, it signaled potential delays in rate cuts, reinforcing a hawkish tilt.
This led to a rise in U.S. Treasury yields and a 0.17% increase in the U.S. Dollar Index (DXY)—yet Bitcoin still managed a 2.37% gain on Wednesday. The divergence suggests growing investor appetite for risk assets despite tightening monetary conditions.
Further supporting bullish sentiment was Thursday’s release of Q4 2024 GDP data, which came in at a weaker-than-expected 2.3% annualized growth rate—below both forecasts and Q3’s 3.1%. Sluggish economic expansion tends to weaken dollar demand, indirectly benefiting alternative stores of value like Bitcoin.
On-Chain Trends Mirror Past Bull Cycles
Glassnode’s latest on-chain analysis reveals striking similarities between the current market cycle and the 2015–2018 bull run. One key metric is Realized Cap growth, which measures the aggregate value of all coins based on their last movement price. The current cycle has seen a 2.1x increase in Realized Cap—well below the 5.7x peak of the previous cycle but closely aligned with the 2015–2018 trajectory.
This indicates a more mature and less speculative market, with reduced volatility and moderated capital inflows. While some analysts warn of an impending supply shock due to declining exchange balances, Glassnode argues this narrative is misleading.
Bitcoin holdings on centralized exchanges have dropped from 3.1 million BTC in July 2024 to just 2.7 million BTC today. However, much of this outflow is not due to mass withdrawals by retail investors but rather migration into ETF custodial wallets, such as those managed by Coinbase. This structural shift reflects institutional adoption rather than scarcity-driven hoarding.
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Instead, Glassnode identifies capital rotation—the transfer of wealth from long-term holders to new investors—as the primary engine of market cycles. Current patterns resemble those seen in late 2017 and early 2021, suggesting we may be approaching a demand exhaustion phase, where price advances slow and HODLing sentiment strengthens.
February Outlook: A Seasonally Strong Month for BTC
Bitcoin kicked off 2025 with a bang, reaching a new all-time high of $109,588 on January 20 and closing the month with an 11% gain. But historically, February may offer even greater upside potential.
Data from Coinglass shows that Bitcoin has delivered the third-highest average monthly returns in February over the past decade, with an average gain of 15.66%. Only April and November have outperformed it seasonally.
This recurring trend could provide a psychological and technical tailwind for traders in the coming weeks. With BTC currently hovering near $104,000, a sustained move above $105,000 could pave the way for a retest of January’s peak.
Technical Indicators: Mixed Signals Ahead
On the technical front, Bitcoin found solid support at its 50-day EMA ($98,845) and has since rebounded, closing above $104,700 on Thursday.
The Relative Strength Index (RSI) stands at 57 on the daily chart—above the neutral 50 level—indicating strengthening bullish momentum. However, the Moving Average Convergence Divergence (MACD) remains in convergence, reflecting trader indecision.
A bullish MACD crossover would confirm renewed upward pressure and support an extended rally toward $110,000 or beyond. Conversely, a daily close below $100,000 and the 50-day EMA could trigger further downside, with next major support around $90,000.
Frequently Asked Questions (FAQs)
Q: Why did Bitcoin drop earlier this week?
A: Bitcoin’s dip was largely driven by broader risk-off sentiment in global markets following Nvidia’s stock decline due to competition from China’s DeepSeek AI model. This triggered liquidations and de-risking across crypto and equities.
Q: Is Bitcoin still correlated with stock markets?
A: Yes—especially with tech stocks like Nvidia and indices like the Nasdaq. However, Bitcoin showed relative resilience during this week’s sell-off, suggesting its correlation may be stabilizing rather than weakening.
Q: What does declining exchange balance mean for Bitcoin’s price?
A: Falling exchange balances are often misinterpreted as supply shocks. In reality, much of the outflow is due to institutional demand via ETFs. True scarcity signals depend on long-term holder behavior and on-chain activity.
Q: How reliable is historical return data for predicting Bitcoin performance?
A: While past performance isn’t guaranteed future results, seasonal trends like February’s average 15.66% return suggest favorable market psychology and recurring investment flows during this period.
Q: What are the key technical levels to watch for Bitcoin?
A: Immediate resistance lies at $109,588 (January high). Support is strong at $98,845 (50-day EMA), with major downside risk if $100,000 fails as a psychological floor.
Q: Could ETF inflows continue driving Bitcoin demand?
A: Absolutely. With U.S.-approved spot Bitcoin ETFs attracting institutional capital, ETF-related custody flows are now a structural factor supporting long-term accumulation.
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