Bitcoin Tumbles Below $90K, Mirroring Broad Retreat from Risk Assets
Introduction:
Bitcoin's upward trajectory, spurred by Donald Trump's election, has reversed amidst a broader sell-off of risky assets. The cryptocurrency plunged below $90,000, marking its lowest point since November 2021.
Intraday Decline and Market Impact:
Bitcoin's intraday decline reached 8.5%, the largest drop since August. At 11:20 AM ET on Tuesday, it traded at $86,805, down 7.6%. Other cryptocurrencies, including Ether, XRP, and Solana, also experienced significant losses.
Shift from Risk-on Appetite:
The recent turmoil in digital assets represents a stark departure from the risk-on sentiment that propelled crypto markets post-election. Bitcoin has shed approximately 20% since Trump's inauguration, as his confrontational stance towards allies and geopolitical rivals undermines investor confidence and inflation concerns persist.
Outflows and Liquidations:
Exchange-traded fund investors have been pulling back from Bitcoin funds, with the iShares Bitcoin Trust ETF experiencing a rare outflow of $158 million on Monday. More than $956 million has exited US-listed spot Bitcoin ETFs in February. Liquidations have also been substantial, with $815.8 million and $860 million worth of long positions closed over the past two days.
Offshore Positioning and Volatility:
Perpetual futures, favored by offshore investors, have witnessed a decline in leveraged long positions. This aggressive positioning contributes to heightened volatility.
Industry Setbacks:
Sentiment has also been impacted by recent industry events, including the Bybit hack, which siphoned off $1.5 billion in Ether, and the memecoin scandal involving Argentina's President Javier Milei. These events have eroded confidence in digital assets.
Impact on Crypto-Related Stocks:
Shares of crypto-related companies have also taken a hit. Coinbase Global Inc. has lost 29% over the past week, while Strategy has shed 20% over three days. Bitcoin miner MARA Holdings Inc. has declined almost 10%.