Bitcoin Risks Test of $58K Support as On-Chain Metrics Deteriorate

Bitcoin’s recent price action has been dominated by severe selling pressure, dashing hopes of a swift recovery. After attempting to climb back above $78,000, the cryptocurrency faced renewed bearish aggression, pushing it lower. The decline accelerated sharply over the weekend, with a roughly 10% drop on Saturday alone triggering one of the largest liquidation events on record. According to the analysis, this single-day plunge wiped out more than $2 billion in long positions across futures trading venues.

The sell-off was severe enough to push Bitcoin’s price on Coinbase as low as $75,644. At that point, it had slipped approximately 10% below the estimated average cost basis of U.S. spot Bitcoin ETFs, which stands around $84,000. The asset also briefly traded below the reported average cost basis of $76,037 for Strategy and neared its one-year low of $74,420, a level set during the market turmoil of April 2025. This price action underscores the intensity of the recent correction and the vulnerability of leveraged market participants.

Alex Thorn, head of research at Galaxy Digital, provided a sobering assessment based on on-chain data and market structure, indicating continued downside risk for BTC. A critical metric highlighted is that 46% of Bitcoin’s circulating supply is now ‘underwater,’ meaning those coins last moved on-chain at higher prices than current levels. This creates a pool of potential selling pressure from investors sitting on unrealized losses.

Furthermore, Thorn noted that Bitcoin’s January close marked its fourth consecutive red monthly candle, a pattern not seen since 2018. Historically, such trends have been precursors to deeper corrections. The analysis points to a concerning precedent: with the exception of 2017, Bitcoin has not previously experienced a roughly 40% drawdown from an all-time high without that decline extending to 50% or more within three months. Based on the current cycle, this historical pattern would imply a potential move toward $63,000.

Adding to the bearish technical outlook, Thorn identified a significant gap in on-chain ownership between roughly $82,000 and $70,000. This gap suggests limited investor demand or accumulation within that price range, increasing the likelihood that any downward move could accelerate through it with little support. The analysis places two critical long-term support levels much lower: the realized price near $56,000 and the 200-week moving average around $58,000.

Compounding the technical weakness is a lack of positive catalysts. Thorn outlined that potential drivers for a rally remain difficult to identify. Narratives that might typically support Bitcoin, such as it acting as a digital safe-haven akin to gold and silver, have failed to materialize during the recent period of increased macroeconomic and geopolitical uncertainty.

While external events like the passage of U.S. crypto market structure legislation, known as the CLARITY Act, could provide a boost, Galaxy Digital notes the odds of its passage have diminished in recent weeks. Furthermore, the firm suggests that even if passed, the positive impact might benefit altcoins more than Bitcoin itself. The combination of weak momentum, macroeconomic headwinds, and absent catalysts raises the probability that Bitcoin drifts toward the lower end of the $70,000 range and potentially tests the realized price and 200-week moving average in the high-$50,000 area in the coming weeks or months.

This gloomy assessment is echoed by other analysts. Crypto analyst Doctor Profit has recently lowered his expectations for Bitcoin’s cycle bottom following the price decline and loss of key technical support levels. He has revised his projected bottom to a lower range between $54,000 and $44,000, down from his earlier estimate of $50,000 to $60,000. While the levels around $56,000 to $58,000 have historically represented cycle bottoms and strong long-term entry points, the current market deterioration suggests the final low may be deeper than previously anticipated.