By Michael Scott
The cryptocurrency market suffered a sizeable plunge, with market leader Bitcoin crashing 7% in the past 24 hours to drop below $88,000.
The slump marks the first time Bitcoin has slid below the $90,000 price level in over a month, suggesting a potential shift in investor sentiment. Former BitMEX chief Arthur Hayes projects the Bitcoin goblin town is imminent amid tariffs, weaker AI stocks, and consistent liquidations push the crypto market further down.
Macro Risks Amid Tariff Tensions
On Tuesday, Bitcoin led altcoins into a further downtrend as the crypto investors weighed $1.4 billion in Bybit exploits and macro risks. The crypto decline worsened from Monday as investors reacted to the renewed US-China trade tensions. It coincided with a sharp decline in the technology stocks, fueling further market risk-off sentiment.
Scrutiny into the chart shows the global largest crypto by market value slid 7% to $88,000, the lowest level witnessed since February 3 per CoinGecko data. The decline in crypto coincides with weaker US equities as the Nasdaq Composite surrendered substantial value amid concerns over AI demand. Additionally, the S&P 500 slipped in the third consecutive session.
Investor sentiment has taken a hit following the tariffs announced by US President Donald Trump targeting Canadian, Mexican and Chinese imports. The president confirmed moving forward with the initial plan, reigniting concerns over looming inflation.
Crypto investment firm Asymmetric founder Joe McCann indicated that tariffs replace the tax cuts, hence dismissing its deployment by Trump as usual. He considers the situation to continue this year as tariff revenue would help offset the effect of extending tax cuts. This will limit adding trillions to the US national debt.
Bybit Hack Effect
Solowin Holdings managing director Marco Lim dismissed Trump tariffs as behind the downtrend, instead considering the market rout is aggravated by the risk-off mood after the Bybit $1.5 billion exploit that drained its Ethereum and related token on Friday.
Lim considers Bitcoin has, before the decline, been range-bound and priced in the good news. However, a primary focus for the investors is the expectation that the Federal Reserve will announce rate cuts in subsequent quarters.
The US Treasury yields were lower on Monday as markets weighed on the inflation risks. Nevertheless, the uncertainty over geopolitical and monetary policy developments leaves investors on edge.
Is Tech-Sector Weakness to Blame?
Other market analysts consider that tech-sector weakness combined with tariff uncertainty will weigh on risky assets, including crypto and stocks. The analysts indicated that such are not the greatest headwinds the investors monitor.
Merkle Tree Capital chief investment executive Ryan McMillin considers the tariffs inflationary. As such, their most significant impact is on slowing growth. He considers that concluding the Russia-Ukraine war is more deflationary, unlike tariffs, which are considered inflationary.
Investors express concern about the Nvidia earning report as the sector faces concerns regarding AI chip demand following DeepSeek’s claims that China offers lower-cost alternatives. The Nasdaq decline has seen Bitcoin extend losses, given that the lead crypto asset often trades alongside risk-sensitive tech stocks.
Massive Liquidation Hit Crypto
Scrutiny into the trading activity reveals over $1.59 billion liquidated within the crypto-leveraged positions over the past 24 hours per Coinglass data. This suggests that compelled selling yielded the ongoing downturn.
The forced liquidations aggravated the selloff, with several analysts confident that the washout could enhance the market structure by eroding excess leverage. Lead researcher at Singapore-headquartered trading firm Prestor, Peter Chung, considers that liquidation implies flushing out the majority of leveraged positions.
Chung illustrates the existence of Bitcoin-specific catalysts as the working group tasked with delivering regulatory clarity in the crypto sector. The task force aims to identify and eliminate ambiguity in the existing crypto-related regulations.
With the preliminary review process now complete, Chung considers the forthcoming details will shape the crypto market sentiment. This could offer the tailwind Bitcoin need to recover the $100,000 milestone. The analyst believes Bitcoin will regain bullish steam and outperform other risk-on assets.