So Bitcoin decided to take a little tumble below $85K yesterday, and suddenly everyone’s acting like the sky is falling. Sure, it bounced back above $91K today, but let’s be real – even the crypto bros are getting a bit sweaty.
Here’s what actually happened: Remember when Bitcoin hit almost $124K back in October? Yeah, that wasn’t because millions of people suddenly discovered crypto. It was mostly traders doing what traders do best – borrowing money to chase shiny things. Classic leverage party.
But here’s the thing about leverage parties – they always end with someone crying into their portfolio. When Bitcoin started slipping, all those borrowed-money positions got liquidated faster than you can say “diamond hands,” creating a beautiful cascade of automatic sell-offs.
The Japan Situation (It’s Complicated)
Yesterday’s drama got extra spicy thanks to fears about Japan potentially raising interest rates. Now, this matters because of something called the “carry trade” – basically, investors borrow super cheap money in Japan (where rates have been practically zero forever) and invest it in higher-returning stuff like US stocks and Bitcoin.
It’s like borrowing from your friend who never charges interest to buy lottery tickets. Great until your friend wants their money back.
When Japanese rates go up, this whole scheme unravels, and Bitcoin is usually first on the chopping block. We saw this movie before in summer 2024 when Bitcoin dropped from $66K to $54K in just a few days.
The Technical Stuff (Don’t Worry, I’ll Keep It Simple)
Here’s where it gets interesting. Bitcoin has fallen below its 50-week moving average – which is basically a fancy way of saying “the average price over the last year.” This line has been pretty reliable at calling the end of Bitcoin parties in the past.
Every time Bitcoin has broken below this line and stayed there (except during COVID, because 2020 was weird for everyone), it’s marked the end of a boom cycle. Bitcoin lost this level in early November and hasn’t been able to get back above it.
So Should You Buy This Dip?
Depends on what kind of investor you are. If you’re a trader using leverage, this probably isn’t your moment. The momentum is ugly, the news is negative, and the technicals are screaming “maybe wait.”
But if you’re a long-term Bitcoin believer? This could be your chance to slowly accumulate – emphasis on slowly. Don’t go all-in like you’re at a Vegas blackjack table. Scale in gradually.
The long-term story hasn’t changed. Institutions are still piling in, governments are still printing money like it’s going out of style, and Bitcoin’s role as digital gold is getting stronger. JPMorgan even thinks it could hit $240K eventually (though they probably said that about a lot of things).
Bottom line: Wait for Bitcoin to get back above that 50-week moving average before getting too excited. Until then, maybe don’t try to catch falling knives – they’re sharp and your fingers are precious.