The cryptocurrency market is experiencing severe turbulence as Bitcoin plunged below $90,000, marking its lowest price since mid-November 2024. This dramatic drop has been primarily driven by two main factors: the announcement of new tariffs by U.S. President Donald Trump and the recent hack of cryptocurrency exchange Bybit, which has sent investors reeling.
On February 24, Trump confirmed the enactment of tariffs on goods imported from Canada and Mexico, set to rise by 25% as part of his broader trade strategy. This announcement quickly raised inflation concerns among investors, leading them to shift away from riskier assets such as cryptocurrencies. By the morning of February 25, Bitcoin had fallen 8.21% over the past 24 hours, trading around $87,900, according to CoinMarketCap. Other cryptocurrencies have not fared much worse, with Ethereum experiencing declines of 11.42% during the same period.
The market's reaction can be attributed to apprehensions about the potential impact of these tariffs. "The drop in Bitcoin prices is likely related to the broader macroeconomic uncertainty affecting most financial markets this week, especially due to the various tariffs announced by President Trump," said Adrian Przelozny, CEO of Australian cryptocurrency exchange Independent Reserve. Analysts fear the tariffs might exacerbate inflation, requiring even more stringent monetary policies from the Federal Reserve—an outcome regarded as negative for the cryptocurrency industry.
Adding to the unease is the recent hack targeting Bybit, which is ranked among the largest digital asset exchanges globally. On February 21, hackers reportedly linked to North Korea managed to steal approximately $1.4 billion worth of Ethereum from the platform. Bybit assured its clients it has sufficient reserves to cover the losses, but the event has amplified fears surrounding the security of cryptocurrency exchanges.
Following these events, the liquidation amounts across the crypto market skyrocketed, totaling about $1.51 billion as per data from CoinGlass. This figure is among the largest ever recorded for the sector. Within this figure, Bitcoin accounted for roughly $654 million, with Ethereum and Solana also seeing hundreds of millions wiped out through liquidations. Most of these liquidated positions were of the 'long' type, where investors anticipated prices would increase.
Indeed, the recent turmoil is reminiscent of the sharp declines earlier this month, when the market saw over $2 billion liquidated due to investor skepticism following Trump's earlier trade policies. Notably, around 394,000 investors were impacted by the recent liquidations, representing nearly half the number of those affected during the early February liquidations.
Market sentiment appears to be shifting from euphoria following Trump's election to apprehension concerning the actual impact of his policy decisions. The high expectations surrounding cryptocurrency following Trump's electoral victory are now clashing with the economic realities posed by his administration's trade strategies. "The Bybit hack was the latest of a series of events, like questionable launches of memecoins, which brought back unpleasant memories for cryptocurrency market participants," remarked Caroline Mauron, co-founder of Orbit Markets.
The uncertainties stemming from the tariffs and the chaos around exchanges may drive even seasoned investors away from digital assets. Many are worried about the aftermath of what had appeared to be bullish trends for cryptocurrencies post-election. Bitcoin has slid nearly 20% since Trump's inauguration, as questions about the sustainability of his pro-crypto policies have now come to the forefront.
Despite these challenges, analysts suggest this turmoil might offer buying opportunities for those confident in the fundamentals of cryptocurrencies. The declining prices could potentially act as entry points for new investors willing to brave the current volatility.
With inflation concerns looming and macroeconomic instability at play, cryptocurrency markets may need to brace for continued uncertainty moving forward. Investors closely watch upcoming financial reports and developments on trade policies with bated breath, hoping for signals of stability.