Mr Biden’s aura of inevitability – and the perception that he is the best-placed candidate to evict Donald Trump from the White House in November – is now shattered.
This provides Mr Bloomberg with a crucial opening: to pick up the mantle of standard-bearer of the Democrats’ moderate wing.
He’ll have competition, though, from both Mr Buttigieg and Amy Klobuchar, the Minnesota senator whose late surge in New Hampshire won her a strong third place.
The moderates now have a fight on their hands, with Mr Sanders set to assume the status of frontrunner.
In the Real Clear politics polling average, he is now narrowly in the lead for the first time since Mr Biden entered the race. In Nevada, Mr Sanders is closing the gap between the two men.
Only in South Carolina, with its large African-American electorate, does Barack Obama’s former Vice President look more comfortably ahead.
But a win in South Carolina may give Mr Biden only a temporary respite.
In the two biggest states voting on Super Tuesday, his position looks increasingly tenuous.
In California, which has over 400 convention delegates up for grabs, Mr Sanders has been ahead since late December; in Texas, a poll last month suggested he may only be two per cent behind Mr Biden.
Mr Sanders’ efforts will be buoyed by the news that he raised $25 million (£19.3 million) in January – more than any other candidate in any full quarter in 2019. A huge slice of that war chest is going into TV ads with California and Texas receiving the lion’s share.
The Sanders machine does, though, face huge challenges: his support continues to hover around a quarter of Democrats, suggesting that he is beatable if the moderate vote unites around one candidate.
But the greatest obstacle is the desire of Democrat voters, above all else, to deny Mr Trump a second term, and the fear that the self-described democratic socialist from Vermont is simply too left-wing to beat him.
On the eve of the Iowa caucus, as the Third Way centrist group warned Mr Sanders has “a politically toxic background”, the Democratic Majority for Israel group unleashed $700,000 (£540,000) worth of TV ads warning that the senator was unelectable.
Mr Sanders’ supporters say that his left-wing populism is the best antidote to the president’s appeal to white working-class voters, while the enthusiasm his campaign generates will drive up turnout among Democrat-leaning groups who traditionally don’t go to the polls.
Certainly, surveys indicate that, alongside Mr Biden and Mr Bloomberg, the senator performs better than any other Democrat candidate against Mr Trump.
Nonetheless, the fear among many Democrats remains that, as New York Times columnist Frank Bruni suggested last weekend, “he’s [Jeremy] Corbyn, and, in my view, a hell of a general-election risk”.
That fear is Mr Bloomberg’s opportunity. Since entering the race, his numbers have begun creeping up and he’s now moved into third place with one poll this week having him snapping at Mr Biden’s heels.
Convinced that only he can beat Mr Trump, he is splashing his considerable cash liberally to make this point to Democrats and has so far spent $255 million (£196 million), more than all the other candidates combined.
And there is much more to come: last week’s inconclusive results from Iowa led him to double his television spending in key states — he’s already airing ads in 27 of the 50 — and expand his staff to more than 2,000.
In California, a state where TV advertising is highly effective, he is outspending and out-organising all the other candidates including Mr Sanders.
Mr Bloomberg’s message is a simple one. He is, in his own words, the “Un-Trump”; a highly successful businessman and competent executive with the toughness to take down the president.
“There’s nothing that Donald Trump can do or say that can hurt me,” he boasts in his stump speech. “He’s not going to bully me and I’m not going to let him bully you.”
Still, Mr Bloomberg will face great scepticism in a party that has been drifting to the left since 2016. His huge wealth and political gymnastics – a lifelong Democrat, he switched to the Republicans when he ran for mayor of New York before becoming an independent and then returning to the party – will turn off many activists.
Many African American voters remain appalled by the stop-and-frisk powers he gave to the police in New York (although a Quinnipiac poll this week showed that, by 22 to 27 per cent he now comes second to Mr Biden among black voters).
And while his mix of social liberalism and fiscal conservatism may play well in the suburbs, it’s not clear that it is necessarily the recipe for electoral success among Midwestern Trump voters.
If it comes down to it, a fight between Mr Sanders and Mr Bloomberg will be hugely significant and not simply because the two men will be vying to become the first Jewish presidential nominee.
It will also be an ideological battle for the soul of the Democratic Party, between a left-winger who rails against the “billionaire class” and one of the wealthiest men in the country who accuses his opponent of wishing to “turn America into a kibbutz”.
There would be no quarter given and no holds barred.
