Analysts at Deutsche Bank say Bitcoin’s latest downturn reflects a loss of investor conviction rather than a breakdown in market structure, as prices slipped below $70,000 for the first time since November 2024.
Strategists, including Jim Reid described the move as part of Bitcoin’s transition from a purely speculative trade into a more macro-sensitive asset, increasingly shaped by interest rates, liquidity conditions, and equity market correlations.
ETF Investors Test Their Psychological Floor
According to Deutsche Bank, the decline is putting pressure on a new cohort of institutional investors who entered the market through spot Bitcoin ETFs.
The average entry price for these investors is estimated near $84,100, meaning many are now sitting on paper losses of roughly 8% to 9%. Analysts describe this phase as a fading of the so-called “Tinkerbell Effect,” where belief in rapid upside weakens as price momentum stalls, even if the underlying thesis remains intact.
Hawkish Fed Expectations Add Macro Pressure
The selloff accelerated following the nomination of Kevin Warsh as the next Chair of the Federal Reserve, a move that markets interpreted as reinforcing a “higher-for-longer” interest rate outlook.
Analysts note that expectations of tighter monetary policy and a reduced Federal Reserve balance sheet have weighed heavily on risk assets, including Bitcoin, which remains sensitive to real rates and dollar liquidity.
Rising Correlation With Tech Deepens the Drawdown
Deutsche Bank also highlighted Bitcoin’s increasing correlation with AI-exposed technology and software stocks. As valuations in those sectors came under pressure, Bitcoin moved in tandem, reinforcing the perception that it is trading more like a high-beta macro asset than a standalone hedge.
This correlation has reduced Bitcoin’s short-term diversification appeal, especially during periods of equity-led risk aversion.
Forced Deleveraging Amplifies Volatility
Since January 29, more than $6.67 billion in crypto positions have been liquidated across the market. Deutsche Bank says this wave of forced deleveraging has thinned liquidity and intensified downside moves, even as overall positioning appears cleaner than in previous selloffs.
Diverging Views on the Path Forward
Despite near-term volatility, institutional outlooks remain split rather than uniformly bearish. Some analysts, including those at Stifel, warn Bitcoin could fall as low as $38,000 if macro conditions deteriorate further.
Others, such as CoinShares and Bernstein, maintain year-end 2026 targets between $120,000 and $150,000, citing the potential for regulatory clarity and eventual rate cuts later in the year.
Bottom Line
Deutsche Bank frames Bitcoin’s current weakness as a confidence reset, not a structural collapse. While near-term pressure remains tied to macro forces and positioning, the bank suggests the market is moving into a more mature phase, one where conviction must be earned through fundamentals rather than momentum alone.
