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Date: 2025-02-25 14:56:38
The cryptocurrency market continues its downward trend – what are the factors contributing to this crash, and what can we expect moving forward?
Bitcoin (BTC) has plunged below $88,000, reaching its lowest point in three months. The entire cryptocurrency market is experiencing losses, with the total market capitalization decreasing by 8%, falling from over $3.31 trillion to around $3.09 trillion.
This sudden downturn can be attributed to macroeconomic uncertainty, regulatory concerns, and shifting investor sentiment. Analysts predict that Bitcoin may drop even further, potentially testing the support level at $70,000.
Despite the overall market decline, Bitcoin has outperformed other cryptocurrencies like XRP (XRP) and AAVE (AAVE), which have seen drops of over 15% in the past week, according to data from crypto.news.
"The crypto decline is mainly affecting assets outside of Bitcoin," stated Mark Cudmore on Bloomberg TV. "Bitcoin is comparatively stronger."
Several elements could be contributing to Bitcoin's recent decline.
The immediate cause of Bitcoin's decline appears to be U.S. President Donald Trump's announcement of new tariffs on imports from Canada and Mexico, along with a 10% tariff on Chinese goods. Investors responded negatively due to concerns about increasing inflation and economic instability, which led to a decrease in risk assets such as Bitcoin.
Three weeks prior, Trump announced tariffs, causing Bitcoin to drop from $105,000 to a low of $91,441 as the cryptocurrency market decreased by nearly 10%. Trump's reaffirmation of these tariffs seems to be causing turbulence in the markets once again.
Read More: "Bitcoin Drops Below $90K, Prompting $1B in Cryptocurrency Margin Calls"
Bitcoin's price fluctuations have started to resemble those of traditional financial markets. The S&P 500 has dropped 2.3% over the past five trading days, while the Nasdaq Composite has fallen 4%.
Bitfinex's February 24 Alpha report indicated that deteriorating U.S.-China relations and restrictions on semiconductor exports, particularly Nvidia chips, have contributed to declining investor confidence.
Historically, significant price fluctuations have characterized Bitcoin and the cryptocurrency market's cycles. However, traders are now experiencing a period where momentum seems to be waning.
"There was a recent collapse in volatility," said Cudmore. "It served as an early warning sign that a major drop in Bitcoin was likely imminent."
The decrease in volatility has left some traders feeling cautious, as periods of minimal price variation often precede sharp breakouts – in either direction. With Bitcoin struggling to find a clear direction, some fear that the current lull could signal a more substantial correction.