The cryptocurrency market experienced significant volatility this week, with the price of Bitcoin plunging below the $90,000 mark for the first time since November 2024. This decline can be attributed to various factors, primarily linked to geopolitical events and market reactions to economic news.
Bitcoin's value dropped to approximately $86,000 mid-week, reflecting a broader trend across the cryptocurrency space, where numerous altcoins also recorded substantial losses. Ethereum fell by 7%, and Solana decreased by 8%, showcasing the intensive sell-off as investor confidence wavered.
Market analysts are linking this downturn to recent announcements by U.S. President Donald Trump, who, during his cabinet meeting, proposed imposing steep tariffs on imports from the European Union. "We have made our decision and will announce it very soon. It will be 25 percent," Trump stated, sparking fears among investors about increasing tensions and potential trade wars, which have historically influenced the performance of risk assets like cryptocurrencies.
Over the past week, Bitcoin has experienced over 10% decline, with the latest data showing it had dropped more than 13% since last weekend. The speculation around Trump's tariffs has prompted investors to liquidate positions, with over $1 billion exiting Bitcoin-related ETFs, marking the largest single-day outflow since these products were introduced last year.
Notably, the outflow from Bitcoin ETFs had reached about $937 million, emphasizing the market's reaction to external pressures. Funds such as Fidelity's FBTC and BlackRock's IBIT were among the hardest hit, with net outflows of $344 million and $164 million, respectively. Such movements reflect the cautious sentiment prevailing among institutional investors.
Adding to the tumult, hackers recently stole approximately $1.5 billion worth of tokens from the Bybit exchange, heightening fears of security vulnerabilities within the crypto trading space. This incident seems to have compounded the fears already present following Trump's announcements.
Investor sentiment has been deeply affected, with many choosing to pull back from riskier assets. Analyst Alexander Potavin from FG "Finam" noted, "Market participants investing in risky assets have become increasingly nervous due to signs of economic activity potentially waning. Investors are reducing their risk positions as uncertainty looms over U.S. trade policy."
Despite the current downturn, some analysts maintain hope for Bitcoin's recovery, linking future price movements to Trump's strategy, including his intentions of fostering cryptocurrency growth through regulatory changes. Predictions from Trading Economics suggest Bitcoin prices may recover to around $97,000 by the end of the first quarter of 2025, depending on market conditions.
Market observers are also noting the importance of Bitcoin's 200-day exponential moving average (EMA) positioned at $85,696, which now serves as a key support level. Claims state if Bitcoin prices can hold above this threshold, it may lead to potential recovery. Conversely, failure to maintain this level could see Bitcoin testing lower ranges between $67,797 and $70,000.
Interestingly, the current market reaction seems almost benign compared to past crashes, such as the aftermath of the FTX collapse. The Bybit hack, which led to significant market distress, did not trigger the same level of panic or selling frenzy. Experts suggest this could indicate growing resilience within the crypto community, but nonetheless highlight caution as the effects of previous market shocks persist.
Despite the uncertainty, Bitcoin's price fluctuated around $84,612 by Tuesday, March 26, showing some signs of stabilization following the drastic sell-offs earlier. Enthusiasts and traders are watching closely, as the market tends to react variously to economic developments.
"We are currently observing what many have predicted—a correction following the rapid market gains fueled by pre-election enthusiasm and statements made by Trump during his campaign. This reversal aligns with the anticipated market correction," commented Andrey Alexeev, head of monitoring and development at BYNEX.
Looking ahead, the financial industry is anxiously monitoring how both domestic policies and international trade relations play out, as these will undoubtedly shape market dynamics. Investors remain cautious yet hopeful about the future valuation of Bitcoin and the overall health of the cryptocurrency ecosystem.