Bitcoin Plummets Below $90,000 Amid Broader Market Retreat
Bitcoin has experienced a significant decline, dropping below the $90,000 mark and reaching its lowest point since mid-November. This downturn follows a rally sparked by Donald Trump’s election to the presidency, which is now reversing as investors pull back from riskier assets. The leading cryptocurrency fell by as much as 8.5%, marking its largest single-day drop since August, and was trading at $86,805 at 11:20 a.m. in New York on Tuesday. Other digital currencies, including Ether, XRP, and Solana, also saw declines during this trading session. An index that tracks major cryptocurrencies is on track for its largest four-day decrease since early August.
Shift in Market Sentiment Following Trump’s Inauguration
The recent fluctuations in cryptocurrency prices represent a significant departure from the bullish trend observed after Trump’s election in early November. Since his inauguration in January, Bitcoin has lost approximately 20% of its value, driven in part by Trump’s confrontational approach to international relations, which has unsettled investors amid ongoing concerns about high inflation. Adrian Przelozny, CEO of crypto exchange Independent Reserve, noted that the decline in Bitcoin’s value is likely a reflection of broader economic uncertainties affecting various financial markets, particularly in relation to President Trump’s new tariffs.
Investor Behavior Reflects Wider Market Trends
The drop in cryptocurrency values aligns with a larger retreat from riskier investments that gained traction late last week, prompted by a series of disappointing economic reports that led to significant declines in the Nasdaq 100 index. As a response, investors have shifted their money into safer bond markets, resulting in a continuous decrease in the 10-year Treasury yield over five consecutive sessions. Additionally, investors in exchange-traded funds (ETFs), who had previously contributed to the surge in crypto markets, have begun to withdraw their funds. The iShares Bitcoin Trust ETF experienced a significant outflow of $158 million on Monday, while the Fidelity Wise Origin Bitcoin Fund saw nearly $250 million withdrawn, marking it as one of the largest ETF withdrawals in the sector. February has seen over $956 million leave U.S.-listed Bitcoin ETFs, setting a new record for outflows in this category.
Liquidation of Bullish Crypto Positions
Recent bullish positions in the cryptocurrency market have faced substantial liquidations over the past two days, with figures reaching $815.8 million and $860 million, respectively, according to data from Coinglass. Perpetual futures, often favored by offshore investors due to their limited availability in the U.S. market, indicate a decline in leveraged long positions. Vetle Lunde, head of research at K33 Research, commented on the situation, noting that while perpetual traders had shown interest in increasing Bitcoin long positions, many investors have suffered losses as Bitcoin approached new yearly lows amid significant long liquidations. The aggressive strategies employed by offshore investors have contributed to an environment characterized by heightened volatility.
Recent Incidents Impacting Market Sentiment
Market sentiment has been further dampened by a series of recent setbacks specific to the cryptocurrency industry, including a major hack targeting the Bybit exchange and a controversy surrounding a memecoin associated with Argentina’s President Javier Milei. These events have explained the underperformance of digital currencies compared to other risk assets, such as technology stocks. The Bybit hack, which analysts attribute to North Korean hackers, resulted in the theft of approximately $1.5 billion worth of Ether, intensifying concerns regarding the security of digital asset platforms. Researchers have noted that this incident highlights the increasing sophistication of hacking operations linked to North Korea.
Impact on Crypto-Related Companies
The fallout from these events has also affected shares of companies within the crypto sector. Coinbase Global Inc. has seen a decline for seven consecutive days, resulting in an overall drop of 29% during that period. The company Strategy has lost roughly 20% over the past three days and is now facing losses for the year. Additionally, Bitcoin mining firm MARA Holdings Inc. has experienced a nearly 10% drop, contributing to a total decline of 25% since December.
