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28 February 2025

Bitcoin Price Drops Below $80,000 Amid Market Volatility

Investors express caution following significant declines and a major exchange hack.

Bitcoin's price has dropped below $80,000 for the first time since November 2024, according to data from CoinMarketCap. Early on February 28, the cryptocurrency was trading at approximately $79,630, reflecting growing worry among investors about market stability.

This decline is not just about Bitcoin; it signifies broader turbulence within the cryptocurrency market, which has witnessed over $200 billion wiped from its total capitalization. Just two days prior, Bitcoin was trading at $84,000 but faced significant pressure as it dropped from its recent high of $98,000.

Other cryptocurrencies have similarly struggled, with Ethereum seeing a decline of 8.3% and notable falls experienced by the likes of XRP (down 6.8%) and Binance Coin (down 5.6%). The overall market appears to be experiencing heightened caution as demand diminishes across the board.

Under the veil of the fading "Trump effect," traders have expressed anxiety, leading to greater risk mitigation strategies such as increased buying of put options. Data from Deribit, the world’s largest cryptocurrency options exchange, revealed strong interest for put options with exercise prices at $70,000, indicating how investors are bracing for volatility. The open interest for these contracts has reached approximately $4.9 billion.

Chris Newhouse, Research Director at Cumberland Labs, noted, "Tax policies are dampening economic prospects, alongside persistent short-term inflation expectations. The recent cyber-attack on Bybit exacerbated fears, leading to panic selling and eroding market confidence." This incident, being one of the largest ever seen, has drawn attention for its severe impact on trading activities.

Alongside the turmoil, Bitcoin ETF funds have seen massive outflows, totaling around $2.1 billion over the past six days. On February 25 alone, there was more than $1 billion withdrawn from spot Bitcoin ETF funds, marking the most significant withdrawal since their introduction at the start of 2024. Meanwhile, Ethereum ETFs have lost around $130 million amid similar selling pressures.

Ravi Doshi, Co-Director of Market at FalconX, remarked, "The cryptocurrency market is still searching for fresh momentum to reverse the pessimistic trend, with investors growing increasingly hesitant to engage and trade actively." There lies uncertainty, prompting many to take considerable steps back from active investment.

The sentiment among investors has shifted toward caution, with many avoiding new positions until clearer market signals emerge. Bohan Jiang, Director of OTC Trading at Abra, provided insight, stating, "The market is witnessing a combination of liquidation pressure on spot trading and adjustments to trading basis strategies." This indicates dual pressures affecting market performance.

Several factors contribute to Bitcoin's recent performance downfall. The overarching policy environment under the new U.S. administration is causing jitters among traders. Since the inauguration of President Donald Trump, Bitcoin's value has decreased by around 20% from its historical peak.

Experts agree the prevailing fear of inflation remains significant, adding to investor trepidation. Bybit’s attack has also raised alarms, questioning the security of cryptocurrency trades at exchanges, affecting overall market trust.

Overall, the cryptocurrency market currently reflects significant volatility and uncertainty, with many hesitating to push forward due to the lack of bullish indicators. Responses from market analysts suggest the absence of new support measures could prolong this bearish phase.

The future of Bitcoin and the larger cryptocurrency ecosystem currently seems fragile, with many players hoping for clarity and stability. Experts are stressing the need for renewed confidence and engagement from investors, which could reinstate upward momentum. Until then, the crypto community remains on alert, watching as the situation evolves.