Bitcoin's Safety Net Emerges as Galaxy Digital Anticipates Deeper Pullback

The recent steep sell-off in Bitcoin during late January has sparked intense discussions about whether the cryptocurrency market is nearing a cyclical bottom or merely entering a further decline.

Key Takeaways

Galaxy Digital's research indicates that Bitcoin may drop toward long-term support levels, estimated between $60,000 and $70,000.
A significant portion of Bitcoin’s supply is currently held at a loss, which historically indicates late-stage bear markets.
Bitcoin's performance has diverged from traditional safe-haven assets like gold amid macroeconomic instability.
Some analysts suggest potential future shifts in capital from gold to risk assets, akin to trends observed in 2020.

Bitcoin’s Potential Downward Trend

According to Alex Thorn, the head of research at Galaxy Digital, recent price movements show that Bitcoin may face further downside risks. Thorn predicts that Bitcoin's price could slide to approximately $70,000 and then toward the 200-week moving average, which is roughly around $60,000, in the near future. He pointed out that historically, these levels have served as strong entry points for long-term investors.

From January 28 to January 31, Bitcoin experienced a decline of about 15%, with a notable 10% drop on a single Saturday, which sparked over $2 billion in long liquidations across various derivatives platforms. This incident marked one of the largest liquidation events ever recorded.

Bitcoin dropped as low as $75,644 on the Coinbase exchange, coming close to 10% under the average cost basis of U.S. spot Bitcoin ETFs, which is estimated at about $84,000. BTC also dipped below its average purchase price near $76,000 and approached the "Tariff Tantrum" low from April 2025.

The price decline has resulted in a significant number of investors facing losses; Thorn noted that around 46% of Bitcoin's circulating supply is currently held at a loss, a figure historically linked to the latter stages of bear markets. On-chain analysis indicates a limited ownership zone between $70,000 and $80,000, suggesting that demand could be tested as the price approaches these levels.

Thorn commented further that various factors, including on-chain data, weaknesses at critical price points, macroeconomic uncertainties, and a lack of imminent catalysts, indicate that Bitcoin is likely to trade lower toward the 200-week moving average in the coming weeks or months. He also mentioned that the realized price, now around $56,000, typically converges with the 200-week moving average close to cycle bottoms.

Macro Sentiment Influencing Bitcoin's Performance

The overarching macroeconomic dynamics are also affecting sentiment. During a time of heightened geopolitical risks and economic uncertainty, Bitcoin has struggled to rally alongside gold and silver, which undermines its position as a hedge against currency debasement. While safe-haven flows have directed capital toward commodities, Bitcoin has lagged behind, creating an unusual divergence that Thorn believes negatively impacts the asset's narrative.

Despite these challenges, there are some hopeful signals. Although the accumulation by large holders (whales) has remained subdued, there has been a reduction in profit-taking among long-term holders, which averaged around $500 million daily through the end of 2025. Historically, such a slowdown in selling has coincided with market bottoms.

Future Possibilities for Bitcoin Rotation

Certain analysts see similarities between current market conditions and those in 2020. For instance, Bull Theory referenced August 2020, when gold peaked before capital shifted into risk assets, which propelled Bitcoin's significant rally into 2021.

Evidence shows that when gold reached a high of $2,075 and subsequently dropped nearly 10% over four weeks, Bitcoin also mirrored this trend, plummeting nearly 20% from $12,000 to $9,800.

With the ISM index now above 50, indicating economic expansion, and gold recently experiencing a sharp pullback, some experts propose that a rotation into risk-on assets could occur over the coming months.

While Galaxy Digital sees limited signs of a confirmed market bottom, the firm contends that if Bitcoin approaches its realized price or the 200-week moving average, these levels could once again provide a long-term safety net, just as they have historically in previous cycles.