Bitcoin has experienced a significant decline, falling below the $90,000 mark to reach its lowest point since mid-November. This downturn comes as the positive momentum that followed Donald Trump’s election has reversed, coinciding with an overall withdrawal from riskier investments.
Bitcoin’s Notable Drop
The cryptocurrency saw a decrease of up to 8.5%, marking its largest intraday drop since August. As of 11:20 a.m. in New York on Tuesday, Bitcoin was down by 7.6%, trading at $86,805. Other major cryptocurrencies, including Ether, XRP, and Solana, also suffered losses during this session. An index that tracks leading digital tokens is on track for its most significant four-day decline since early August.
Market Reaction to Broader Economic Concerns
The recent volatility in the cryptocurrency market stands in stark contrast to the bullish rally that followed Trump’s election in early November. Bitcoin has plummeted by approximately 20% since his inauguration in January, primarily due to Trump’s confrontational approach towards allies and geopolitical adversaries, which has shaken investor confidence amid ongoing inflation worries.
Expert Insights on Price Declines
Adrian Przelozny, CEO of the crypto exchange Independent Reserve, stated that the drop in Bitcoin prices is likely tied to increased macroeconomic uncertainty affecting various financial markets recently, particularly in light of new tariffs announced by President Trump. This decline reflects a broader trend of investors moving away from riskier assets, a shift that gained traction late last week after a series of disappointing economic reports resulted in the Nasdaq 100 experiencing its worst four-day performance since September.
Shifts in Investment Strategies
As a result, capital has been redirected to safer investments, leading to a consecutive five-day decrease in the 10-year Treasury yield. Investors in exchange-traded funds (ETFs), who had previously driven the post-election surge in cryptocurrency values, are now retreating. The iShares Bitcoin Trust ETF, the largest fund dedicated to spot Bitcoin, saw an outflow of $158 million on Monday, while nearly $250 million was withdrawn from the Fidelity Wise Origin Bitcoin Fund, marking significant withdrawals among ETFs. In February alone, US-listed spot Bitcoin ETFs experienced outflows exceeding $956 million, making it the worst month on record for this category, according to Bloomberg Intelligence data.
Liquidations and Market Dynamics
In recent days, bullish positions in the crypto market have faced substantial liquidations, amounting to approximately $815.8 million and $860 million, respectively, as reported by Coinglass. Perpetual futures, commonly used by offshore investors due to their unavailability in the US market, have seen a decline in leveraged long positions. Vetle Lunde, head of research at K33 Research, commented that while perpetual traders showed interest in increasing their Bitcoin long positions, they have largely faced setbacks as Bitcoin hit new yearly lows amid significant long liquidations. This has contributed to an environment of heightened volatility in the market.
Recent Industry Setbacks Impacting Sentiment
The market sentiment has further deteriorated due to a series of recent setbacks specific to the cryptocurrency industry. This includes the largest-ever hack of the Bybit exchange and a controversy surrounding a memecoin linked to Argentina’s President Javier Milei. Such incidents explain why digital currencies have lagged behind other risk assets, such as technology stocks, in recent weeks. The Bybit hack, carried out by hackers believed to be associated with North Korea, resulted in the theft of approximately $1.5 billion in Ether, which has since been laundered rapidly. Analysts have noted that this incident highlights the growing sophistication of North Korea’s hacking operations.
Impact of Memecoins on Market Confidence
Memecoins introduced by Trump and his wife Melania just prior to the inauguration have also struggled, further eroding confidence in his pro-cryptocurrency policies. The Trump token has plummeted by over 80% since its initial surge shortly after launch, based on data from CoinGecko. Caroline Mauron, co-founder of Orbit Markets, a firm providing liquidity for crypto derivatives, remarked that the Bybit hack, along with other questionable memecoin launches, has revived negative memories for participants in the crypto market.
Decline in Crypto-Related Stocks
Shares of companies associated with cryptocurrency have also experienced declines. Coinbase Global Inc. has seen its stock drop for seven consecutive days, resulting in a 29% decrease over that period. Additionally, Strategy has lost around 20% within three days and is now in negative territory for the year. Bitcoin mining company MARA Holdings Inc. has fallen nearly 10% and is down 25% since December.
