Bitcoin Faces Critical Breakdown: Technical Collapse, Rising Bond Yields, and Quantum Computing Threats Signal Potential Bear Market

For weeks, Bitcoin maintained a healthy uptrend from its late November lows, climbing steadily toward $98,000. The chart pattern during this period was textbook bullish, characterized by a series of higher highs and higher lows that created what appeared to be an ascending triangle—a pattern typically associated with continuation of upward momentum.

However, November 20th breakdown below $89,000 changed everything. By falling to $87,298, Bitcoin not only established a lower low but fundamentally transformed the chart structure. What once looked like a bullish ascending triangle now appears to have morphed into a bear flag pattern, a formation that typically precedes further downside.

This technical deterioration opens the door to substantially lower price targets. Conservative estimates suggest Bitcoin could retreat to the $80,000 level, with more bearish scenarios pointing toward $70,000. In an extreme case, based on certain technical patterns and historical comparisons, prices could potentially fall as low as $40,000 to $50,000, though such an outcome would require a confluence of negative factors.

The Death Cross Warning Signal

Adding to the technical concerns is the emergence of a “death cross” on Bitcoin’s weekly chart—specifically, the crossing of the 21-week moving average below the 50-week moving average. This particular death cross carries historical significance because it appeared at major market tops in both 2017 and 2021, preceding extended bear markets that lasted approximately a month in the cryptocurrency space.

The appearance of this indicator alone doesn’t guarantee a bear market, but its historical track record demands attention. In previous cycles, when these two moving averages crossed in this manner, Bitcoin experienced substantial corrections before finding a bottom. The timing of this signal, combined with the recent chart structure breakdown, creates a concerning technical backdrop for the cryptocurrency.

Echoes of 2021: A Troubling Pattern

Perhaps most worrying is how current price action mirrors the pattern seen at the end of the 2021 bull market. During that cycle, Bitcoin topped out 532 days after the halving event, then proceeded to fall approximately 50% from its peak to its first major low, dropping from $67,000 to around $40,000.

Following that initial decline, Bitcoin consolidated in a range for roughly 100 days. Many investors believed the worst was over and that this represented the bear market bottom. However, after this consolidation period, Bitcoin experienced another severe selloff, ultimately declining an additional 65% to reach the true bear market bottom at approximately 70% below its all-time high.

The current situation shows disturbing similarities to this pattern. Bitcoin has already corrected approximately 36% from its recent highs—a less severe drop than in 2021, which makes sense given that Bitcoin is now a larger, more mature asset with somewhat reduced volatility. Following this correction, the cryptocurrency has been consolidating for approximately 70 days, similar to the 100-day consolidation seen in 2021.

If this pattern were to repeat fully, it would suggest that the current consolidation is merely a pause before a more substantial decline. Under this scenario, potential downside targets would include $57,000 and even $37,500, representing a much deeper correction than the market has experienced so far.

Broader Market Context: Elevated Risk Across Assets

Bitcoin’s technical challenges aren’t occurring in isolation. The S&P 500 has reached the upper boundary of a channel that has contained price action since 2017, creating a decision point for equity markets. While the index could break out to new highs, bolstered by potential Trump administration stimulus measures, the alternative scenario—a 10% to 15% correction—appears increasingly plausible.

Technical indicators support caution. The Relative Strength Index (RSI) for the S&P 500 shows increasingly elevated sentiment readings, suggesting the market may be overextended. This overbought condition increases the probability of a near-term pullback.

Meanwhile, precious metals markets are displaying their own signs of excess. Gold and silver have both reached all-time highs and are showing parabolic price movements. Silver’s weekly RSI has reached levels not seen since 2006, the last time the metal was this technically overbought before experiencing a significant correction.

If silver were to retreat back toward the $50 to $60 range, and if the stock market were to experience a 10% to 15% correction, the implications for Bitcoin could be severe. The cryptocurrency has already corrected 30% to 40%, but a broader risk-off move across traditional markets could trigger additional selling pressure and potentially drive prices substantially lower.

The Immediate Catalyst: Geopolitics and Bond Markets

Yesterday’s market turbulence was initially attributed to geopolitical tensions surrounding Greenland, with former President Trump threatening sanctions against European nations that might send troops to the territory. However, according to Scott Bessent, the true catalyst may have been developments in Japanese bond markets.

Japanese 30-year bond yields have experienced a six standard deviation move over the past two days—an extraordinarily rare occurrence that has rippled through global bond markets. German yields, French yields, and US yields have all risen in response, creating stress across the fixed-income landscape.

The significance of rising Japanese bond yields extends beyond typical market volatility. For years, Japan maintained near-zero interest rates, enabling what’s known as the carry trade. Investors would borrow Japanese yen at essentially zero cost, convert those funds to US dollars, and invest in US Treasury bonds yielding 4% to 5%, pocketing the difference. This strategy made Japan the largest foreign holder of US Treasury securities.

Now, with Japanese bond yields rising to approximately 3.96%, the attractiveness of this trade has diminished dramatically. When US 10-year Treasuries yield around 4.5%, the arbitrage opportunity of just 0.6% barely justifies the currency and interest rate risk involved. As a result, investors are unwinding these positions, selling US Treasuries to convert dollars back to yen and repay their Japanese loans.

This unwinding process creates upward pressure on US Treasury yields, which rose noticeably over the past several days. The dynamic is driven by Japan’s new Prime Minister, who has advocated for aggressive stimulus measures. Market participants worry these policies could devalue the yen and undermine Japan’s long-term fiscal stability, demanding higher yields to compensate for increased risk.

The Quantum Computing Question

Beyond technical factors and market dynamics, a new fundamental concern has emerged that may explain why Bitcoin has underperformed even as other risk assets have rallied: quantum computing.

For the first time in Bitcoin’s history, the cryptocurrency has entered what experts call the “quantum event horizon”—the point at which the estimated time until quantum computers become powerful enough to break Bitcoin’s cryptographic security is shorter than the time required to upgrade Bitcoin’s protocol to become quantum-resistant.

Bitcoin’s security relies on private keys protected by cryptography so complex that conventional computers cannot crack it within any practical timeframe. However, quantum computers operate on different principles that could potentially break this encryption. If quantum computing advances faster than Bitcoin’s ability to implement quantum-resistant cryptography, the entire security model of the cryptocurrency could be compromised.

This isn’t merely theoretical concern. Christopher Wood, a prominent Wall Street investor and early Bitcoin proponent who had allocated 10% of his portfolio to the cryptocurrency, recently announced he was removing Bitcoin entirely from his holdings. He’s reallocating these funds to gold, silver, and mining equities, citing quantum computing as an existential threat to Bitcoin’s long-term value proposition.

Wood’s decision was influenced by a Chaincode Labs study estimating that between 20% and 50% of circulating Bitcoin could be vulnerable to quantum-enabled private key extraction. His reversal is particularly significant because he was among the first major institutional investors to embrace Bitcoin as a digital alternative to gold.

The quantum computing concern represents a new category of risk for Bitcoin—not a cyclical market downturn or regulatory challenge, but a potential technological obsolescence. If Bitcoin cannot develop and implement quantum-resistant cryptography before quantum computers become sufficiently powerful, the cryptocurrency could face a catastrophic loss of confidence.

Companies are raising hundreds of millions of dollars to develop quantum computing capabilities, with Bitcoin’s very existence potentially accelerating this development. The cryptocurrency’s high value creates enormous incentive for quantum computing advancement, as breaking Bitcoin’s cryptography would provide access to billions of dollars in potentially vulnerable holdings.

Market Outlook and Critical Levels

Given these technical and fundamental challenges, the near-term outlook for Bitcoin has shifted decidedly bearish. Current market bounces should be viewed as relief rallies rather than the resumption of the uptrend. The critical level that would invalidate this bearish thesis is $98,000—Bitcoin would need to exceed this level to establish a new higher high and restore the bullish market structure.

Until Bitcoin reclaims $98,000, rallies are likely to be met with selling pressure, and the path of least resistance appears to be lower. Traders who previously focused on long positions should now consider short opportunities, though with appropriate risk management given the volatility inherent in cryptocurrency markets.

The consolidation period Bitcoin has experienced over the past 70 days may simply be setting the stage for the next leg down, similar to what occurred in 2021. If traditional markets experience corrections from their current elevated levels, Bitcoin could face additional selling pressure that drives prices toward the more bearish targets of $70,000, $57,000, or potentially even lower.

This represents a significant shift in market dynamics, requiring even the most committed Bitcoin bulls to reassess their positions and prepare for the possibility of substantially lower prices ahead.