Bitcoin experienced a significant decline, dropping below the $90,000 mark and reaching its lowest point since mid-November. This downturn follows a rally that initially surged after Donald Trump’s election as President but has since been affected by his trade tariffs and ongoing challenges within the cryptocurrency sector.
Bitcoin’s Recent Performance
As of 7:51 a.m. New York time on Tuesday, Bitcoin fell by as much as 7.6%, trading around $89,042. Other digital currencies also faced losses, with Ether, XRP, and Solana showing notable declines during the session. An index that tracks leading cryptocurrencies is on track for its largest four-day decrease since early August, marking a clear shift in market sentiment.
Market Reactions to Geopolitical Uncertainty
The recent volatility in the cryptocurrency market contrasts sharply with the risk-on environment that characterized the post-election period. Since Trump’s inauguration in January, Bitcoin has decreased by approximately 20%. This decline is attributed to Trump’s confrontational policies towards both allies and adversaries, which have raised concerns among investors amidst ongoing inflation worries. Adrian Przelozny, CEO of the crypto exchange Independent Reserve, noted that the drop in Bitcoin prices is likely a reflection of the broader economic uncertainty affecting many financial markets, linked to the tariffs introduced by President Trump.
Shift in Investor Behavior
The plummeting prices in the crypto market align with a broader withdrawal from riskier assets. This trend gained traction late last week as disappointing economic data led to the Nasdaq 100 experiencing its worst three-day performance in two months. Consequently, investors have redirected their funds into safer bond options, resulting in the 10-year Treasury yield declining for five consecutive sessions.
ETF Withdrawals and Market Trends
Investors in exchange-traded funds (ETFs), who previously contributed significantly to the post-election crypto surge, are now retreating. The iShares Bitcoin Trust ETF (IBIT), the largest spot Bitcoin fund, saw an outflow of $158 million on Monday, marking a rare occurrence. Additionally, the Fidelity Wise Origin Bitcoin Fund experienced nearly $250 million in withdrawals, making it the third-largest outflow among ETFs. In February alone, over $956 million has been withdrawn from US-listed spot Bitcoin ETFs, marking a record-low month for the sector, according to Bloomberg Intelligence data.
Impact of Market Manipulation and Security Concerns
In the derivatives market, more than $1.34 billion in bullish crypto positions was liquidated within a 24-hour timeframe, based on CoinGlass data. Sentiment has also worsened due to several industry-specific issues, including a significant cyberattack on the cryptocurrency exchange Bybit and a controversy involving memecoins linked to Argentina’s President Javier Milei. The Bybit hack, which analysts suggest is tied to North Korean hackers, resulted in the theft of approximately $1.5 billion in Ether, further raising concerns regarding the security of digital asset platforms.
Challenges for Memecoins and Investor Confidence
Memecoins associated with Trump and his wife Melania, launched shortly before his inauguration, have also struggled, casting doubt on his purported pro-crypto stance. Data from CoinGecko indicates that the Trump token has plummeted over 80% since its initial launch. Caroline Mauron, co-founder of Orbit Markets, a crypto derivatives liquidity provider, remarked that the Bybit hack and the questionable launch of certain memecoins have reignited negative sentiments among crypto market participants.
