Bitcoin price has faced a notable drop as risk-off sentiment has taken hold in the global markets, leading to a substantial selloff in risk assets. The world’s largest cryptocurrency token, Bitcoin, saw a decline of over 8 percent in the last two days, falling to just above $88,000 during Wednesday’s trading session. This marks its lowest level since November 15, with its current standing at 88,843 at the time of writing this report.
Bitcoin price has slumped nearly 20 percent from its peak following Trump’s inauguration on January 20. Concurrently, other significant cryptocurrencies, including Ethereum, Cardano, and Solana, have also seen declines exceeding 10 percent during the same period.
Risk-off sentiment has emerged as a key factor contributing to the sharp downturn in cryptocurrencies, driven by deteriorating economic data in the U.S. Trump’s escalating tariff threats and a series of political developments have further increased uncertainties in the financial markets. Moreover, a significant cryptocurrency hack targeting the Dubai-based exchange Bybit has intensified concerns regarding blockchain security.
Markets await fresh catalysts for cryptocurrency enthusiasm
The markets are currently on the lookout for new catalysts to rekindle enthusiasm in cryptocurrencies. The U.S. technology sector, which usually aligns closely with cryptocurrency movements, has recently underperformed on Wall Street. Tesla’s shares fell over 8 percent on Tuesday following reports of nearly halved car sales in Europe last month, negatively impacting the broader sector’s performance.
Nvidia’s upcoming earnings report is also expected to draw considerable attention. Recent U.S. economic data indicated a drop in consumer confidence, the most significant decline since August 2021. This decline reflects a weakened economic outlook amid Trump’s series of tariff announcements, particularly affecting the U.S.’s two largest trading partners, Mexico and Canada. Signs of renewed inflation, coupled with the Fed’s hawkish stance, have contributed to the negative sentiment.
Global markets dominated by risk-off attitude
The risk-off attitude dominated global markets across all asset classes on Tuesday, with equities losing ground, oil prices dropping, gold retreating, and the U.S. dollar weakening. Government bond yields fell sharply, with the U.S. 10-year Treasury yield plunging to its lowest level since mid-December of the previous year. Government bonds are typically seen as safe-haven assets since their yields move inversely to bond prices.
Falling cryptocurrency prices reflect a broader retreat from risky assets that gained momentum late last week, when a series of disappointing economic reports pushed the Nasdaq 100 to its worst four-day drop since September. Consequently, investments have shifted towards bond havens, resulting in a five-session decline in the 10-year Treasury yield.
Exchange-traded funds investors step back
Investors in exchange-traded funds (ETFs), who previously contributed to the post-election surge in cryptocurrencies, have begun to withdraw. The iShares Bitcoin Trust ETF (ticker IBIT), the largest spot Bitcoin fund, experienced a rare outflow of $158 million on Monday, while nearly $250 million was withdrawn from the Fidelity Wise Origin Bitcoin Fund—the third-largest withdrawal among all ETFs. In total, over $956 million has exited from U.S.-listed spot Bitcoin ETFs in February, marking this as the worst month on record for the category, according to Bloomberg Intelligence data.
The bullish positions on cryptocurrencies have faced significant liquidations over the past two days, amounting to $815.8 million and $860 million respectively, as reported by Coinglass. Perpetual futures, often favored by offshore investors due to their limited availability in the U.S. market, witnessed a decline in leveraged long positions.
Read more: Crypto market cap plummets by $182 billion as Bitcoin ETFs face $435 million in outflows
Sentiment souring after industry setbacks
Overall sentiment has also deteriorated in light of recent industry-specific setbacks. These include the largest-ever cryptocurrency hack targeting the Bybit exchange and a memecoin scandal involving Argentina’s President Javier Milei. This helps clarify why digital currencies have lagged behind other risk assets, such as technology stocks, in recent weeks.
The Bybit hack, in particular, has heightened fears regarding the safety of digital asset platforms. Analysts attribute the breach to hackers linked to North Korea, who reportedly made off with about $1.5 billion worth of Ether and have begun laundering the stolen assets. Several researchers have noted a growing sophistication among North Korea’s hacking groups.
Moreover, memecoins launched by Trump and his wife Melania just prior to the inauguration have underperformed, undermining confidence in his pro-cryptocurrency policies. The Trump token has plummeted more than 80 percent since reaching its peak shortly after its launch, based on data from CoinGecko.
Shares of companies associated with cryptocurrency have also faced declines. Coinbase Global Inc. has seen its shares fall for seven consecutive days, resulting in a 29 percent drop over the period. Strategy has lost around 20 percent over three days and is now in the red for the year. Bitcoin mining company MARA Holdings Inc. is down nearly 10 percent and has experienced a 25 percent decline since December.
