Bitcoin Plummets Below $90,000 Amid Broader Market Retreat
Bitcoin has experienced a significant decline, falling below the $90,000 mark, reaching its lowest point since mid-November. This downturn follows a period of growth that coincided with Donald Trump’s election victory, but now adds to a widespread withdrawal from high-risk investments.
Significant Intraday Decline
During trading on Tuesday morning in New York, Bitcoin saw a drop of up to 8.5%, marking its most substantial single-day decline since August. At around 11:20 a.m., the leading cryptocurrency by market capitalization was down 7.6%, trading at $86,805. Other digital currencies, including Ether, XRP, and Solana, also reported declines, contributing to an index that tracks major cryptocurrencies headed for its most significant four-day decrease since early August.
Shift in Market Sentiment
This recent volatility in the cryptocurrency market represents a stark contrast to the optimistic rally that followed Trump’s election in November. Since his inauguration in January, Bitcoin has plummeted approximately 20%. Investor confidence has been shaken by Trump’s confrontational approach towards both allies and adversaries, compounded by ongoing concerns about high inflation rates.
Macro Uncertainty Influencing Prices
Adrian Przelozny, the CEO of crypto exchange Independent Reserve, commented on the situation, suggesting that the decline in Bitcoin values is closely tied to the overall economic uncertainty affecting financial markets recently. This uncertainty has been exacerbated by various tariffs announced by President Trump.
Flow of Investments to Safer Assets
The decline in cryptocurrency prices aligns with a broader trend of investors shying away from riskier assets, a trend that escalated late last week when disappointing economic data led to a significant drop in the Nasdaq 100. As a result, capital has shifted into safer investments, causing the yield on 10-year Treasury bonds to decrease for five consecutive sessions.
ETF Investors Pull Back
Investors in exchange-traded funds (ETFs), who previously contributed to the crypto market’s surge post-election, have recently reduced their involvement. On Monday, the iShares Bitcoin Trust ETF, the largest fund of its kind, experienced a withdrawal of $158 million, marking a rare instance of outflow. Additionally, nearly $250 million was withdrawn from the Fidelity Wise Origin Bitcoin Fund, making it one of the largest ETF withdrawals recorded.
Record Exits from Bitcoin ETFs
February has proven to be a challenging month for U.S.-listed spot Bitcoin ETFs, with over $956 million withdrawn, the highest monthly outflow on record, as per data from Bloomberg Intelligence. The trend of bullish positions in cryptocurrency has also led to substantial liquidations, with figures reaching $815.8 million and $860 million over the past two days, according to Coinglass data.
Market Volatility and Offshore Trading
As trading dynamics shift, perpetual futures—a type of contract commonly utilized by international investors—have seen a reduction in leveraged long positions. Vetle Lunde, head of research at K33 Research, noted that while some traders attempted to increase their Bitcoin long positions, they faced significant losses as the asset hit new yearly lows amidst widespread liquidations.
Negative Sentiment from Industry Setbacks
The sentiment in the cryptocurrency market has also been dampened by recent setbacks within the industry. Notably, a massive hack targeting the exchange Bybit and a controversy surrounding a memecoin linked to Argentina’s President Javier Milei have contributed to this negative outlook. The Bybit breach, attributed to North Korean hackers, resulted in the theft of approximately $1.5 billion worth of Ether, effectively raising alarms over the security of digital asset platforms.
Struggles of New Memecoins
Additionally, the performance of memecoins launched by Trump and his wife Melania prior to his inauguration has been disappointing, casting doubt on his perceived pro-cryptocurrency stance. The Trump token, for instance, has plummeted over 80% since its initial spike shortly after its launch, according to data from CoinGecko.
Impact on Crypto-Related Stocks
In conjunction with the downturn in cryptocurrencies, shares of companies associated with the crypto sector have also seen declines. Coinbase Global Inc. has faced a continuous downward trend for seven days, resulting in a 29% decrease during that time. Other firms, such as Strategy, have lost around 20% over a three-day span and are now in negative territory for the year. Meanwhile, Bitcoin mining company MARA Holdings Inc. has dropped nearly 10% and is down 25% since December.
