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Date: 2025-02-25 13:07:00
Authored by Omkar Godbole (All times mentioned are in ET, unless stated otherwise)
The crypto market is experiencing a significant downturn, with bitcoin hitting a three-month low below $88,000 and the CoinDesk 20 Index plummeting by over 10% in the last 24 hours. Several factors have contributed to this decline, including the risk-off sentiment in traditional markets and the impact of memecoins, particularly the recent trading activities surrounding TRUMP and LIBRA.
As previously discussed on Monday, market makers who attended the Consensus Hong Kong conference last week expressed concerns about the memecoin craze draining liquidity from productive crypto sectors, leaving the overall market susceptible.
Another contributing factor is the lack of action from President Donald Trump. Despite making substantial promises during the election campaign, concrete measures have yet to materialize. The anticipated strategic BTC reserve has not been established, and even state-level reserves are facing implementation challenges.
"The industry is still waiting for this to materialize in a tangible way through measures such as a proposed Bitcoin Strategic Reserve," Petr Kozyakov, co-founder and CEO at Mercuryo, told CoinDesk. "In the meantime, sentiment has been severely affected by the biggest ever hack at the Bybit exchange, with 401,000 ETH leaked, and a memecoin sector plagued with high-profile pump and dump schemes."
Moreover, renewed concerns about the U.S. economy are dampening demand for riskier assets.
"There is also some concern about the slowdown in U.S. growth since last week's U.S. Services PMI release, the lowest in 22 months and consistent with GDP growth tracking at 0.6% only," said Aurelie Barthere, principal research analyst at Nansen. "Our Nansen Risk Barometer has also just turned Risk-off from Neutral today."
Collectively, these factors have caused BTC to break out of its two-month-long range between $90,000 and $110,000. According to technical analysis theory, it could potentially drop to $70,000, though the maximum open interest in BTC put options listed on Deribit is at the $80,000 strike, indicating that this level may provide some support.
What could potentially stabilize prices? Possibly an announcement from Trump regarding a strategic reserve or a sharp reversal by the Nasdaq 100. However, the index has fallen below its 50-day SMA, while the yen, a risk-aversion signal, continues to strengthen against G7 currencies, including the dollar.
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Source: Farside Investors