Bitcoin Dips Below $90,000 Amid Market Retreat
Bitcoin has fallen below the $90,000 threshold, reaching its lowest point since mid-November. This decline comes as the post-election rally triggered by Donald Trump’s ascent to the presidency begins to reverse, coinciding with a broader decline in risk assets. Bitcoin experienced a drop of as much as 8.5%, marking its largest intraday decrease since August. At 11:20 a.m. in New York on Tuesday, the leading cryptocurrency was down 7.6%, priced at $86,805. Other cryptocurrencies also faced declines, with Ether, XRP, and Solana experiencing notable losses during the session. An index that monitors major digital tokens is on track for its most significant four-day drop since early August.
Shift in Market Sentiment
The recent decline in digital asset values represents a stark contrast to the “risk-on” rally that propelled cryptocurrency markets upward following Trump’s election in early November. Since his inauguration in January, Bitcoin has plummeted by approximately 20%. This downturn is attributed to Trump’s confrontational approach towards various allies and geopolitical adversaries, which has shaken investor confidence, compounded by ongoing worries about high inflation. Adrian Przelozny, CEO of crypto exchange Independent Reserve, noted that the decline in Bitcoin prices is closely tied to the broader economic uncertainty affecting financial markets recently, which is linked to the various tariffs introduced by President Trump.
Broader Market Trends Affecting Crypto
The drop in cryptocurrency prices reflects a wider retreat from riskier investments that gained momentum late last week due to disappointing economic indicators pushing the Nasdaq 100 into its worst four-day decline since September. This shift has resulted in a movement of capital towards safer bond investments, leading to five consecutive sessions of declining 10-year Treasury yields. Investors in exchange-traded funds (ETFs), who previously contributed significantly to the post-election surge in cryptocurrencies, have recently become more cautious. The iShares Bitcoin Trust ETF, the largest spot Bitcoin fund, experienced a rare outflow of $158 million on Monday, while approximately $250 million was withdrawn from the Fidelity Wise Origin Bitcoin Fund, marking one of the largest withdrawals among ETFs. In February alone, US-listed spot Bitcoin ETFs have seen over $956 million exit, making it the most challenging month on record for this category, according to Bloomberg Intelligence data.
Liquidations and Market Volatility
The recent bearish sentiment towards cryptocurrencies has led to substantial liquidations over the past two days, totaling $815.8 million and $860 million, according to Coinglass data. Perpetual futures, often favored by offshore investors due to their limited availability in the US market, have experienced a decline in leveraged long positions. Vetle Lunde, head of research at K33 Research, commented that while perpetual traders were eager to increase their Bitcoin longs, they have largely faced losses as Bitcoin reached new yearly lows amid significant long liquidations. This aggressive positioning by offshore traders has created a volatile market environment.
Industry Challenges and Sentiment Shift
Sentiment has further soured in the crypto space due to various industry challenges, including the largest-ever hack targeting the exchange Bybit and a memecoin controversy involving Argentina’s President Javier Milei. These events have contributed to the underperformance of digital currencies compared to other risk assets, such as tech stocks. The Bybit hack, which analysts attribute to North Korean hackers, resulted in the theft of approximately $1.5 billion worth of Ether, with the perpetrators rapidly laundering the stolen assets. Several researchers have pointed out that this incident demonstrates an alarming increase in the sophistication of North Korea’s hacking capabilities. Additionally, memecoins introduced by Trump and his wife Melania prior to his inauguration have struggled, further eroding confidence in his pro-crypto stance. The Trump token, for instance, has plummeted over 80% since its initial surge, based on data from CoinGecko.
Impact on Crypto-Related Companies
Shares of companies associated with the cryptocurrency sector have also seen declines. Coinbase Global Inc. has experienced a downturn for seven consecutive days, falling by 29% during this period. Strategy has lost around 20% over three days and is currently in negative territory for the year. Bitcoin miner MARA Holdings Inc. saw a decrease of nearly 10% and has dropped 25% since December.
