The second quarter has begun with investors shifting positions as macro FUD continues to dictate sentiment.
After a bearish first quarter, the big question is whether confidence in digital assets can hold. From a macro lens, the setup for a strong bull run in April looks weak.
Data from Polymarket shows that there is only a 14% chance that shipping through the Strait of Hormuz will normalize by the end of the month, while crude oil is still trading around $112 per barrel.
This background is consistent with a recent report from Santiment. As the chart below shows, discussions surrounding the Iran-US conflict currently rank first in social volume, highlighting rising macro-driven sentiment.
The question naturally arises: now that the macro FUD is dominating the narratives, it is Bitcoin’s [BTC] April rally now in danger?
Historically, Bitcoin has often rebounded strongly in the second quarter after a weak first quarter.
For example, last year Bitcoin fell 11.82% in the first quarter before rising nearly 30% in the second quarter as markets absorbed the “Liberation Day” FUD tied to US President Donald Trump’s changing stance on tariffs.
However, history also shows exceptions.
During the 2022 bear market, Bitcoin recorded a mild correction of 1.46% in the first quarter and then fell 56.2% in the second quarter, marking the worst quarterly performance of the year.
In this context, the key question is: will the markets absorb the current FUD and trigger a new recovery, or is Bitcoin preparing for a deeper downtrend?
Regardless, macro conditions continue to drive investor sentiment, meaning BTC’s April outlook now comes down to how markets position themselves around the ongoing FUD. With markets increasingly pricing in risks, the 86% probability of “ongoing conflict” clearly remains an important signal for the second quarter.
Bitcoin starts the second quarter on a vulnerable footing
Bitcoin’s current technical setup shows clear signs that rising market FUD is not translating into FOMO.
On the chart, BTC has started the quarter by dipping below the $70,000 level. Short-term support is now around $65,000, a zone that could act as a key reaction area for the price.
Therefore, for a local bottom to form, Bitcoin needs strong bidding support to offset ongoing selling pressure and stabilize price action.
Importantly, timing also matters. The equilibrium between supply for profit and supply for loss is now moving toward levels seen in bear market environments.
Currently, approximately 11.2 million BTC remain profitable while approximately 8.2 million BTC are held at a loss, highlighting the growing tension among market participants.
However, rather than causing FOMO, the ongoing FUD appears to be steadily weakening the market’s conviction.
To support this trend, a Glassnode report shows that Bitcoin sharks and whales (who own between 0.1k and 10k BTC) are realizing losses on a large scale.
The seven-day SMA of realized losses now exceeds $200 million per day, reflecting the capitulation behavior of larger entities and paving the way for increased volatility in the near term.
Against this backdrop, the 86% probability that the ongoing conflict between Iran and the US will continue beyond April keeps geopolitical risk at the forefront..
However, with this FUD eroding investor conviction rather than provoking aggressive dip buying, the market is clearly viewing the current environment as a bear phase.
As a result, the chances of a 2022-style Q2 rally for Bitcoin are increasing.
Final summary
- Rising geopolitical risks and market uncertainty are weakening investor conviction, leaving Bitcoin on fragile footing.
- Whale losses and risk-free positioning indicate a bear phase, which could increase the chances of a rally in the second quarter of 2022.