Bitcoin, the leading cryptocurrency, has entered a sharp corrective phase, dropping below the $80,000 mark and erasing nearly 37% of its value from its all-time high of $109,000, achieved during President Donald Trump’s inauguration on January 20, 2025. The downturn has sent shockwaves through the broader cryptocurrency market, wiping out gains made earlier in the year and pushing investor sentiment to its lowest point in two years.
The Crypto Fear and Greed Index, a key metric for measuring market sentiment, recently hit an “Extreme Fear” score of 10, reflecting heightened anxiety among investors. This decline comes amid escalating trade tensions between the United States and several of its key trading partners, including China, Canada, and Mexico.
Trade Tariffs Spark Market Chaos
President Trump’s announcement of new tariffs on imports from these nations has been a major catalyst for the market’s decline. The President revealed plans to double the existing 10% tariff on Chinese goods and impose new tariffs on Canadian and Mexican imports starting March 4. Additionally, he threatened a 25% tax on European Union imports, accusing the bloc of undermining U.S. interests.
These trade restrictions have raised concerns about global economic stability and weakened demand for the U.S. dollar, further exacerbating Bitcoin’s decline. The cryptocurrency briefly fell below its 200-day simple moving average, marking a 16% weekly loss and dipping under $80,000 for the first time since November 10, 2024.
Investor Losses and Market Sell-Off
According to data from Glassnode, short-term Bitcoin holders have realized losses totaling $2.16 billion over the past three days, contributing significantly to the sell-off. Investors who purchased Bitcoin within the last week were hit the hardest, accounting for 42.85% of the losses. Those holding the asset for a week to a month lost $678 million, while longer-term holders also faced substantial declines.
The market turmoil has also impacted U.S.-based spot Bitcoin ETFs, which have seen massive outflows. Coinglass reported that 11 Bitcoin funds experienced a net withdrawal of $938 million over six consecutive trading days. Fidelity’s Wise Origin Bitcoin Fund (FBTC) led the losses with a record $344.7 million outflow, followed by BlackRock’s iShares Bitcoin Trust (IBIT) at $164.04 million. Grayscale’s Bitcoin funds and Bitwise’s Bitcoin ETF (BITB) also reported significant withdrawals.
Bybit Hack Adds to Market Pressure
The cryptocurrency market faced additional pressure following a $1.49 billion hack targeting the exchange Bybit. The breach, disclosed on Friday, caused Bitcoin to drop from nearly $100,000 to $97,370. Although the asset briefly recovered to $96,000 by Monday, the incident further weakened investor confidence.
Extreme Fear Signals Potential Buying Opportunity
Despite the bleak outlook, some analysts suggest that the current market conditions may present a buying opportunity. The Bitcoin Fear and Greed Index’s extreme fear level, now at its lowest since June 2022, often precedes market rebounds. BitMEX co-founder Arthur Hayes noted that such periods of heightened fear can signal an impending recovery.
However, market indicators suggest Bitcoin could fall as low as $70,000 before stabilizing. As trade tensions and macroeconomic uncertainties persist, the cryptocurrency market remains highly volatile, leaving investors cautious about the road ahead.
In the meantime, the global crypto market continues to grapple with the fallout from Trump’s trade policies, security breaches, and shifting investor sentiment, underscoring the challenges of navigating this rapidly evolving landscape.
