Bitcoin Plummets Below $90,000 Amid Market Retreat
Bitcoin has experienced a significant decline, dropping below the $90,000 mark to its lowest point since mid-November. This downturn follows a rally that initially gained momentum after Donald Trump’s election as President, but has since reversed in the face of a wider pullback from high-risk investments.
Sharp Decline in Bitcoin Values
The leading cryptocurrency saw a drop of up to 8.5%, marking the largest intraday decrease since August. As of 11:20 a.m. in New York on Tuesday, Bitcoin was trading at $86,805, down 7.6%. Other cryptocurrencies, including Ether, XRP, and Solana, also faced losses during this trading session. An index that tracks the top digital currencies was on track for its steepest four-day decline since early August.
Market Dynamics Shift Following Trump’s Election
The current turmoil in the cryptocurrency market signals a notable change from the earlier risk-on rally that followed Trump’s election in November. Since his inauguration in January, Bitcoin has seen a decline of approximately 20%, largely attributed to Trump’s confrontational approach towards international allies and rivals, which has eroded investor confidence amidst ongoing inflation concerns.
Impact of Macroeconomic Uncertainty
“The decline in Bitcoin’s value appears to be connected to the broader economic uncertainty that has affected most financial markets in recent days, primarily driven by various tariffs announced by President Trump,” noted Adrian Przelozny, CEO of the crypto exchange Independent Reserve. The decline in cryptocurrency values reflects a general retreat from riskier assets, which intensified late last week due to a series of disappointing economic indicators that led to the Nasdaq 100 experiencing its worst four-day decline since September. Consequently, investors have shifted capital towards safer bond investments, resulting in a continuous decrease in the 10-year Treasury yield for five consecutive sessions.
ETF Investors Pull Back
Investors in exchange-traded funds (ETFs), who previously contributed significantly to the post-election surge in crypto prices, have begun to withdraw. The iShares Bitcoin Trust ETF, the largest Bitcoin fund, reported an outflow of $158 million on Monday, while the Fidelity Wise Origin Bitcoin Fund saw nearly $250 million withdrawn, marking one of the largest exits among ETFs. In February alone, US-listed spot Bitcoin ETFs have witnessed a staggering outflow of over $956 million, setting a record for the category.
Liquidation of Bullish Crypto Positions
The recent bearish sentiment has triggered substantial liquidations of bullish crypto positions, with figures reaching $815.8 million and $860 million over the past two days, according to data from Coinglass. Perpetual futures, which are often favored by international investors due to their limited availability in the US, have seen a decrease in leveraged long positions.
Offshore Traders and Market Volatility
“Traders in perpetual futures were eager to increase their Bitcoin long positions, yet they have faced significant losses as Bitcoin hit new yearly lows amid substantial liquidations,” explained Vetle Lunde, head of research at K33 Research. “The aggressive strategies employed by offshore traders have fostered an environment conducive to ongoing volatility in the market.”
Concerns Over Industry Setbacks
Sentiment in the crypto market has further deteriorated due to a series of recent setbacks, including a significant hack of the Bybit exchange and controversy surrounding a memecoin linked to Argentina’s President Javier Milei. These incidents help clarify why digital currencies have lagged behind other high-risk assets, such as technology stocks, in recent weeks. The Bybit hack, which analysts attribute to hackers associated with North Korea, resulted in the theft of approximately $1.5 billion worth of Ether and has escalated concerns regarding the security of digital asset platforms.
Memecoins and Market Confidence
The launch of memecoins by Trump and his wife Melania shortly before his inauguration has also seen disappointing performance, undermining confidence in his pro-cryptocurrency policies. According to CoinGecko data, the Trump token has plummeted more than 80% since its initial peak shortly after its launch. “The Bybit hack is just the latest in a series of events, including questionable memecoin launches, that have reignited apprehensions for participants in the crypto market,” stated Caroline Mauron, co-founder of Orbit Markets, a liquidity provider for crypto derivatives.
Decline in Crypto-Related Stocks
Shares of companies related to the cryptocurrency sector have also experienced declines. Coinbase Global Inc. has seen a drop for seven consecutive days, resulting in a 29% decrease during that time frame. Additionally, Strategy has lost around 20% over three days and is currently in negative territory for the year. Bitcoin mining company MARA Holdings Inc. has seen its stock price fall by nearly 10%, with a total decline of 25% since December.
