Bitcoin’s recent dip has raised concerns among investors as $1 billion in liquidations and macroeconomic volatility have combined to test its recovery potential. Over the weekend, Bitcoin dropped sharply, largely influenced by geopolitical tensions and newly proposed tariffs. Despite the downturn, some analysts believe a rebound is possible, but others caution that a short-lived recovery, or “dead cat bounce,” remains a risk.

Liquidations and Volatility Shake Bitcoin’s Market

On Sunday, Bitcoin’s price suffered a significant drop, testing its $84,000 recovery level. The drop mirrored broader market instability, driven by geopolitical concerns and new tariffs introduced by former President Trump’s administration. In addition, over $1 billion in liquidations were recorded, a figure that exacerbated the sell-off.

Geoff Kendrick, Global Head of Digital Assets Research at Standard Chartered, remains cautiously optimistic. He pointed out that despite Sunday’s dip, Bitcoin had performed well in the broader market over the same timeframe, trailing only Microsoft and Google in returns. Kendrick emphasized that movements in the foreign exchange (FX) markets on Monday were largely unchanged, suggesting that the cryptocurrency sell-off might be temporary. He forecasts that Bitcoin could potentially rebound to its previous Friday close of $84,000, as the initial panic fades.

Tariff Fears and the Case for Bitcoin as a Hedge

While some analysts remain hopeful, others are less confident about Bitcoin’s short-term recovery. According to Nic Puckrin, founder of Coin Bureau, there is a significant risk of a “dead cat bounce.” Puckrin argues that macroeconomic conditions, including inflation, tariffs, and Federal Reserve actions, will continue to drive market sentiment. He urges caution for new investors who may be tempted to jump into Bitcoin too early amid the volatility.

JPMorgan Chase CEO Jamie Dimon echoed similar concerns in his annual letter to shareholders, highlighting the risk of a global recession fueled by rising tariffs and inflationary pressures. Dimon noted that the recent US trade policy shifts, including new tariffs, could lead to higher inflation and potentially a recession. These risks contribute to a more cautious outlook for Bitcoin in the short term, as global markets face uncertainty.

However, Bitcoin proponent Max Keiser presents a contrasting view. Keiser believes that the global market’s faltering will only enhance Bitcoin’s appeal as a hedge. He argued that in times of economic stress, assets like Bitcoin will attract more capital as investors seek refuge from inflation and fiat currency risks. According to Keiser, Bitcoin is outperforming other assets during this time of global market instability, cementing its status as a safe haven.

The Impact of Short-Term Holders and Market Sentiment

The recent correction in Bitcoin’s price has affected short-term holders, with the Net Unrealized Profit/Loss (NUPL) of Bitcoin’s short-term holders reaching its lowest point since August 2024. This metric suggests that many traders who bought Bitcoin during its recent highs are now facing unrealized losses.

Despite the short-term setbacks, long-term holders remain confident in Bitcoin’s future potential. As these investors hold onto their assets through the volatility, they are providing a foundation for Bitcoin to eventually rebound, should market conditions stabilize.

Key Economic Events Could Shape Bitcoin’s Future

Looking ahead, several key US economic events are expected to influence Bitcoin’s price movements. Upcoming inflation data, Federal Open Market Committee (FOMC) minutes, and jobless claims could all impact market sentiment. Analysts are closely watching these indicators, as they could provide insights into future Fed actions, which may shape investor confidence in Bitcoin.

For some, the recent dip below $80,000 represents a potential buying opportunity, reminiscent of the 2020 crash when Bitcoin’s price fell sharply before embarking on a significant upward trend. As the market stabilizes, many investors will be evaluating whether the current dip is part of a larger buying opportunity or a precursor to a deeper downturn.

Conclusion: A Wait-and-See Approach for Bitcoin

Bitcoin’s recovery path remains uncertain as macroeconomic factors continue to dominate market sentiment. While Standard Chartered’s Geoff Kendrick believes a rebound is likely, others like Nic Puckrin warn of potential short-lived recoveries. The impact of inflation, tariffs, and Federal Reserve policies will continue to shape Bitcoin’s price in the short term. As always, investors should proceed with caution and monitor the broader economic landscape closely.