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The breakout and re-test play has its roots in behavioral aspects of trading and investing.

Cryptocurrency prices are down sharply in recent weeks and not expected to rebound soon, with some of the biggest digital currencies erasing nearly all of the gains they made after Donald Trump's election win triggered a wave of excitement across the industry. Some analysts said the market is likely to remain subdued while waiting for a bullish signal, such as indications that the U.S. Federal Reserve plans to cut interest rates or a clear pro-crypto regulatory framework from the Trump administration. Bitcoin, the biggest cryptocurrency, has fallen 21% from a January 20 peak and is back to levels seen shortly after Trump's U.S. presidential election victory in November, as hopes for a strategic bitcoin reserve fade and tariff threats weigh on demand for speculative assets.

Bitcoin hit its lowest since November and was set for its biggest weekly fall in over two years, swept up in a sell-off in tech stocks at a time when a $1.5 billion hack and doubts about U.S. crypto policy has left industry sentiment fragile. The world's largest cryptocurrency by market value dropped as much as 7% on Friday to $78,273, its lowest since November 10 and on track for a fifth straight day of declines. Bitcoin typically trades loosely in line with assets like tech stocks that rise when investors are optimistic about economic growth.

Investors unnerved by the prospect of U.S. President Donald Trump's impending tariffs drove a wave of selling on Friday that hit risk-sensitive currencies such as the Australian dollar and sent bitcoin tumbling, thereby boosting the dollar. On Thursday, Trump said his proposed tariffs of 25% on Mexican and Canadian goods would take effect on March 4, along with an extra 10% duty on Chinese imports, defying expectations of those who hoped for a further delay in the levies.

Some investors are taking advantage of the heightened volatility by "buying the dip."

Investors have pulled nearly $3 billion from spot bitcoin ETFs in the past week, while gold ETFs are seeing massive inflows—signaling a major shift in market sentiment.

Beijing isn't going to allow crypto exchanges to directly operate BTC in China, but there might be a way that Hong Kong crypto ETFs can be traded in the mainland.