Why Aren't Investors Buying Bitcoin and Ethereum Despite Their "Low" Prices?

Crypto analysis firm BitQuant has provided insights into why investors are hesitant to purchase Bitcoin and Ethereum, even with their recent price drops. This analysis comes amid a weak market environment, with on-chain analysis platform CryptoQuant even predicting a further decline.

Key Takeaways

Investor Hesitancy: Most investors are not buying Bitcoin and Ethereum at current prices due to fears of geopolitical instability and price volatility.
Market Risks: The potential for significant drops in price exists, with estimates suggesting Bitcoin could fall below $40,000.
Long-term Outlook: Analysts believe that while short-term fluctuations are concerning, the long-term value of Bitcoin and Ethereum is likely to increase.
Market Factors: Tariff changes and other socio-political factors are contributing to the current bear market in cryptocurrencies.

Reasons for Investor Hesitancy

BitQuant highlighted on X that, aside from a few exceptions like Michael Saylor, most investors are holding back on buying Bitcoin at $65,000 due to rumors of a potential U.S. attack on Iran.

"Currently, Bitcoin is priced at $65,000 and only Saylor is buying, because the news indicates that the U.S. may soon attack Iran. If that happens, many anticipate Bitcoin may drop to $50,000, explaining the reluctance to buy. They forget that Bitcoin fell from $90,000 to..."

This scenario has led to a belief that if such an attack occurs, Bitcoin will decline to $50,000, further contributing to investor withdrawal. Ethereum is also expected to drop if Bitcoin sees a significant decline.

The analyst pointed out that many market participants overlook the fact that Bitcoin dropped from $90,000 to $60,000 without any major news headlines making waves, viewing this context as unimportant. Thus, he suggested that both Bitcoin and Ethereum could still experience a drop in their prices, regardless of whether the U.S. attacks Iran or not.

However, BitQuant noted that while current price levels seem crucial, in the long term, both Bitcoin and likely Ethereum should increase in value. The analyst emphasized that many fail to understand that Bitcoin is not just an asset but a system. He likened it to a football game – people cheer when there’s a goal but leave when there isn’t one.

The current downward pressure on Bitcoin, Ethereum, and the broader cryptocurrency market is influenced not only by potential U.S. actions against Iran but also by uncertainty surrounding tariffs imposed by former President Trump. Recently, he announced intentions to raise international tariffs from 10% to 15% after the Supreme Court invalidated these tariffs under the International Economic Emergency Powers Act (IEEPA).

Bitcoin Could Drop Below $40,000

Recent analysis from CryptoQuant indicates that Bitcoin may drop below $40,000, potentially reaching around $38,900, which represents the long-term investors' breakeven price.

The analysis references historical precedents, noting that every bear market has involved Bitcoin breaching its breakeven price, triggering a final capitulation phase characterized by realized losses of about 20%. It’s only after this stage that the market has managed to build the necessary foundations for a trend reversal, leading Bitcoin and Ethereum to reach new highs.

Furthermore, another analysis from CryptoQuant indicated that the Coinbase Premium Index shows limited signs of recovery.

Bitcoin
Source: CryptoQuant Chart on X

The 30-minute simple moving average of the index briefly crossed above zero but failed to maintain its momentum at the beginning of the week. CryptoQuant stated that this lack of sustainable recovery in the premium, despite a temporary rise, could be a reason for the recent decline in prices.

Bitcoin
Bitcoin trades at $65,164 on the daily chart | Source: BTCUSDT on TradingView.com