Bitcoin’s Plunge: US Tariffs and Crypto Hack Exacerbate Market Jitters
Bitcoin’s Downturn
Bitcoin, the world’s dominant cryptocurrency, has plummeted to its lowest value in over three months. On Tuesday, it breached the $90,000 barrier, hitting its weakest point since November 18th. At one juncture, it suffered a 7.5% decline, but it has since partially recovered, currently trading 5% lower for the day at $89,314.
Market Uncertainty and US Tariffs
Global investors have been apprehensive lately due to indications that the exceptionalism of the US economy may be waning. President Donald Trump’s impending imposition of tariffs has heightened these concerns.
Trump declared on Monday that his plans to impose a 25% levy on imports from Canada and Mexico from early March remain on schedule. This move has contributed to the unease, prompting a rally in safe-haven US Treasury prices and a drop in yields to two-month lows.
Marcel Heinrichsmeier, a crypto assets analyst at DZ Bank, attributed the recent price decline to the macroeconomic environment. The continued tariff pronouncements and the Trump administration’s overall protectionist stance have created uncertainty and encouraged risk aversion, sparking fears of renewed trade conflicts and inflation.
Crypto Hack Impact
Heinrichsmeier also mentioned the recent hack of the Bybit exchange, which further contributed to the negative market sentiment. The Bybit hack, which resulted in the theft of $1.5 billion worth of digital tokens, is the largest known crypto heist to date.
Altcoin Woes
While Bitcoin has experienced a nearly 8% value loss in the past week, smaller altcoins have suffered more severe declines. Memecoin Dogecoin and tokens for the Solana and Cardano networks have all plummeted by approximately 20%, according to CoinGecko.
Ether’s Drop
Ether, the second largest cryptocurrency by market capitalization, has also declined. It is currently trading at $2,386, down 9.5% and around its lowest level since October.
Joseph Edwards, head of research at Enigma Securities, believes that Tuesday’s sell-off was a delayed reaction to the Bybit hack. He noted that markets initially exhibited resilience but often experience a price correction in the aftermath of such significant destabilizing events.
Sentiment Shift
The shift in market sentiment is partly due to unfulfilled expectations regarding policy changes in the US. Optimism had emerged a few months ago that the Trump administration would support initiatives such as a strategic Bitcoin fund and regulatory easing. However, beyond the initial appointment of crypto-friendly officials, there has been a lack of tangible progress.
ETF Withdrawal
Investors have also been withdrawing funds from Bitcoin-backed exchange-traded funds (ETFs). Data from LSEG indicates that the largest ETFs are poised for a net monthly outflow of around $644 million, marking their most significant outflow since inception in January 2024.
Conclusion
The confluence of US tariff concerns and the Bybit hack has exacerbated the already jittery market sentiment, driving a plunge in Bitcoin and other cryptocurrencies. The absence of favorable developments, such as progress on crypto-friendly regulations or additional cryptocurrency ETF approvals, has further dampened market enthusiasm. Investors are left to navigate a challenging landscape marked by uncertainty and risk aversion.
