Why Bitcoin is Down: Speculative Trading Fades as Market Shifts Toward Stability

Speculative Bitcoin trading is cooling off as
investors shift their focus to safer digital assets. Market uncertainty, global
trade tensions, and recent memecoin scams have reportedly led to reduced risk
appetite. Key indicators show a decline in speculative trading,
suggesting a broader market shift that could shape Bitcoin’s trajectory in
2025.

Bitcoin Liquidity Drops as Investors Reassess Risks

Bitcoin’s hot supply, which measures the percentage of
BTC held for a week or less, has plummeted from 5.9% in late November to just
2.3% by March 20, according to Glassnode.

#Bitcoin’s Hot Supply metric, which tracks coins aged ≤1 week, has contracted from 5.9% to 2.8% of circulating supply – a 50%+ decline over the past 3 months. This signals a sharp reduction in liquid $BTC available for trade: https://t.co/VVw6YXRDHS pic.twitter.com/dfmTOyg5yr

— glassnode (@glassnode) March 20, 2025

This sharp decline indicates that fewer investors are
trading Bitcoin aggressively, opting instead for more stable positions. Another
sign of waning speculation is the stablecoin supply ratio (SSR), which measures
Bitcoin’s supply relative to stablecoins.

The SSR has fallen to 8, its lowest level in over four
months. It was reportedly last seen when Bitcoin traded around $67,000 before its post-election
rally. Historically, an SSR below 10 suggests limited buying power for Bitcoin
compared to its market cap.

Bitcoin Still Outperforms Traditional Assets

Despite the growing cautious sentiment, Bitcoin has
outpaced traditional asset classes since the U.S. presidential election.
Compared to stocks, real estate, and precious metals, Bitcoin remains a
top-performing asset.

One key economic metric, the ICE/BofA U.S. High Yield
Index Option-Adjusted Spread (OAS), has dropped from 3.4% to 3.2%, signaling
temporary relief for risk assets, including Bitcoin and equities, Coindesk
reported.

Will Bitcoin’s Bull Run Continue?

This spread measures the difference in yields between
high-yield corporate bonds and U.S. Treasuries and serves as a gauge of
economic sentiment. However, some analysts warn that this relief may be
short-lived. As Trump’s tariff policies take effect, the OAS spread could
widen, triggering renewed risk aversion.

pic.twitter.com/SWZtSm6NMX

— Donald J. Trump (@realDonaldTrump) February 1, 2025

While speculative activity is slowing, long-term
investors remain optimistic about Bitcoin’s future. The Federal Reserve’s
monetary policy and global economic developments will play a key role in
shaping Bitcoin’s price action in the coming months. For now, Bitcoin’s trajectory remains uncertain, but
history suggests that periods of reduced speculation often set the stage for
the next major move.

This article was written by Jared Kirui at www.financemagnates.com.