Bitcoin entered the second quarter under pressure as macroeconomic fears dominated investor sentiment. Data from Polymarket indicates an 86% probability that conflict in the Strait of Hormuz continues, correlating with heightened social media discussion of geopolitical risks. On-chain analysis reveals large Bitcoin holders are realizing significant losses, signaling potential capitulation. Historically, while Bitcoin has often rebounded in Q2 after a weak Q1, the current environment of eroding conviction raises the possibility of a deeper downturn similar to 2022.
The second quarter has begun with investors shifting positions as macro fear, uncertainty, and doubt continue to dictate market sentiment. After a bearish first quarter, confidence in digital assets faces a test against a backdrop of rising geopolitical tensions.
Market data from Polymarket shows just a 14% chance of shipping through the Strait of Hormuz normalizing by month-end. This aligns with a recent Santiment report which found discussions around the Iran-U.S. conflict currently rank first in social volume.
Historically, Bitcoin has often rebounded strongly in Q2 after a weak Q1. Last year, Bitcoin declined nearly 12% in Q1 before rallying almost 30% in Q2.
However, during the 2022 bear market, Bitcoin posted a mild correction in Q1 and then plunged over 56% in Q2.
Bitcoin’s current technical setup shows clear signs that rising market FUD is not translating into FOMO. The cryptocurrency has begun the quarter by slipping below the $70,000 level, with near-term support now sitting around $65,000.
The balance between supply in profit and supply in loss is now moving toward levels seen in bear market environments, with approximately 11.2 million BTC in profit and 8.2 million BTC held at a loss.
A Glassnode report shows that Bitcoin sharks and whales are realizing losses at scale. The 7-day SMA of realized loss now exceeds $200 million per day, reflecting capitulation behavior from larger entities.
With this FUD eroding investor conviction rather than triggering aggressive dip-buying, the market is clearly treating the current environment as a bear phase.
