OTC Trading Insights on the Square: Bitcoin Breaks Below $84K Support as Risk-Off Sentiment Intensifies

The cryptocurrency market faced a significant correction this week as Bitcoin decisively pierced the $84,000 support level that had been holding since mid-January. This technical breakdown, coupled with a sharp shift in market sentiment toward risk-off positioning, has created a challenging environment for crypto assets across the board. Current BTC trading has slipped to $65.44K, representing a substantial 30.58% decline over the past month—a stark reversal from the earlier optimism surrounding the digital asset’s potential climb toward $100,000.

Bitcoin’s Channel Collapse and Technical Deterioration

Bitcoin has been consolidating within an established trading channel since its retreat below the psychological $100,000 threshold in mid-November. While each test of the lower bound generated short-term rallies, none succeeded in establishing sustained upside momentum. The failure to defend the $84,000 critical support level this week represents a critical inflection point. With this barrier now broken, downside pressure has intensified toward the $80,000 level, with even greater risk toward the April 2025 low of $74,600.

What makes this technical picture particularly concerning is the acceleration of liquidations and the sustained outflows from crypto-focused ETFs, which suggest institutional capital is rotating away from digital assets. This capital flight stands in sharp contrast to the exceptional performance of precious metals, which reached consecutive all-time highs over the same period—a divergence that underscores crypto’s heightened sensitivity to macro risk factors.

Thursday’s Perfect Storm: Earnings Shock and Geopolitical Flare-Up

The catalyst for this week’s sharp selloff originated from multiple sources converging simultaneously. Microsoft’s post-earnings announcement on Wednesday triggered broad market repricing. Despite beating consensus on revenue and earnings, the company’s elevated capital expenditure guidance sparked concerns about AI investment sustainability. The resulting 10% decline in MSFT reverberated through technology equities, with most AI-related names suffering notable losses—Meta being a conspicuous exception.

Concurrently, escalating geopolitical tensions between the United States and Iran drove classic “flight-to-safety” positioning. This pushed precious metals higher, with gold briefly touching $5,600 and silver exceeding $120. However, the parabolic nature of this rally proved unsustainable, as both metals subsequently retreated 8-10%, adding further selling pressure to broader markets. Bitcoin absorbed these headwinds severely, unable to find footing as capital rotated away from risk assets.

Mining Difficulty Collapse and Infrastructure Reallocation

An often-overlooked detail in this market transition is the shifting behavior of Bitcoin miners. Over the past 30 days, mining difficulty has declined more than 4%—a significant pullback that reflects an emerging trend: several major mining operations are repurposing infrastructure toward artificial intelligence and high-performance computing workloads. This reallocation of computing power signals a tactical capital and narrative shift away from cryptocurrency toward the AI infrastructure boom. While temporary in nature, this capital drain has added incremental pressure to the broader ecosystem.

Macro Backdrop: Resilience and Uncertainty

The weekly macro data releases provided a mixed picture. US economic growth exceeded expectations at 4.4% (QoQ) for Q3 2025, while jobless claims remained resilient at 200,000. These signals suggested a labor market capable of withstanding recent Federal Reserve rate cuts. However, consumer confidence deteriorated sharply, dropping from 94.2 in December to 84.5 in January—a miss against the 90.6 forecast that foreshadowed the risk-off sentiment now dominating markets.

International policy decisions remained largely on hold, with both the Bank of Japan and Bank of Canada maintaining their respective policy rates. Importantly, the Federal Reserve held steady at the 3.75% federal funds rate, with Chair Powell declining to offer specific forward guidance on future rate trajectory or commentary on USD volatility—a notably cautious stance.

Near-Term Challenges vs. Longer-Term Structural Support

The immediate outlook remains challenging. Long liquidations are accelerating the current selloff, and the elevated correlation between Bitcoin and US technology equities during risk-off episodes creates additional downside risk. Crypto ETF outflows appear to be funding the rotation into AI-focused investments, creating a structural headwind in the near term.

However, the longer-term picture offers reasons for cautious optimism. Several structural tailwinds remain intact: improving global liquidity conditions, innovative applications in PayFi and Real-World Assets gaining meaningful traction, potential spillover effects from precious metals strength as dollar weakness persists, and continued progress on regulatory frameworks in both the US and internationally. These factors suggest that once current risk-off pressure subsides, capital reflows and upward momentum could return to the crypto ecosystem.

The cryptocurrency market on the Square continues to experience significant volatility. While the current breakdown presents near-term risks, the underlying structural support mechanisms suggest that patient market participants should remain vigilant for accumulation opportunities as this correction potentially exhausts itself.