Why Investors Are Hesitant to Buy Bitcoin and Ethereum Despite Low Prices

Crypto analyst BitQuant has explored the reasons why investors are not purchasing Bitcoin and Ethereum, even as their prices have dipped recently. This analysis comes in light of ongoing market weaknesses, with the on-chain analytics provider CryptoQuant warning of a potential further decline.

Key Takeaways

Investors are hesitant to buy Bitcoin and Ethereum due to geopolitical fears, particularly regarding a potential U.S. attack on Iran and economic factors like increased tariffs.
Analyst BitQuant highlights that historical trends suggest Bitcoin could continue to see lower prices, possibly dropping below $40,000.
The current situation reflects psychological trading behaviors, where investors react to news and sentiment rather than market fundamentals.
Recovery in the crypto market requires a capitulation phase, which could eventually lead to new highs for Bitcoin and Ethereum.

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Reasons Behind the Reluctance to Buy Bitcoin and Ethereum

In a recent post on X, BitQuant observed that virtually no one, apart from proponents of Saylor’s Strategy, is buying Bitcoin at the price of $65,000 due to concerns about possible military actions by the U.S. against Iran. He mentioned that many traders believe a conflict could lead to Bitcoin's price dropping to $50,000, making them hesitant to buy at current levels. Similarly, negative sentiment around Bitcoin suggests Ethereum could also decline if Bitcoin's price falls further.

BitQuant pointed out a critical psychological aspect in the market: participants seem to overlook the fact that Bitcoin dropped from $90,000 to $60,000 without any significant news or events. He believes that this perspective is often dismissed, yet it underlines the potential for continued price drops for both Bitcoin and Ethereum, regardless of geopolitical tensions.

Nevertheless, BitQuant stressed that price levels currently do not matter in the long run and that Bitcoin and possibly Ethereum are expected to rise higher over time. He noted that many individuals still fail to understand Bitcoin as a system and instead view it merely as a tradable asset. He likened Bitcoin's market dynamics to a football match where investors cheer during positive news and exit when results are unfavorable.

The broader cryptocurrency market, including Bitcoin and Ethereum, is under pressure not just because of the uncertainty surrounding a potential U.S. attack on Iran but also due to economic factors like recent tariff announcements from the Trump administration. The U.S. president stated plans to increase the global tariff rate from 10% to 15%, following a Supreme Court decision against tariffs under the International Emergency Economic Powers Act (IEEPA).

Could Bitcoin Drop Below $40,000?

A recent analysis from CryptoQuant suggested that Bitcoin might decline further, possibly dropping below $40,000 to approximately $38,900, which aligns with the cost basis for long-term holders (LTHs). The analysis also referenced historical trends, noting that past bear markets have typically seen Bitcoin’s price dip below its cost basis. This could trigger a final capitulation phase characterized by realized losses of about 20%.

It is only after experiencing this capitulation phase that the market begins to establish the necessary groundwork for a trend reversal, allowing Bitcoin and Ethereum to reach new highs. Moreover, another CryptoQuant analysis indicated that the Coinbase Premium Index is showing limited signs of recovery.

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Source: Chart from CryptoQuant on X

The index's 30-minute simple moving average had briefly moved above the zero level but was unable to sustain this momentum into the new week. CryptoQuant noted that this failure to reclaim sustained gains in the premium could be a potential factor contributing to the recent downward pressure on prices.

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BTC trading at $65,164 on the 1D chart | Source: BTCUSDT on Tradingview.com