Bitcoin Price Plummets: What to Expect as Crypto Faces Record Losses
Bitcoin Price Plummets – Bitcoin (BTC) has started February on a negative note, suffering significant losses amidst heightened fear in the market. As fears surrounding a fresh US trade war spread, the entire crypto market has been rocked, with Bitcoin (BTC/USD) nearing $90,000. The sell-off in the broader cryptocurrency market has resulted in altcoin capitulation wicks, triggering billions in liquidations. The situation has been exacerbated by a tumultuous US stock market, where the S&P 500 futures saw a dramatic dive following President Donald Trump’s announcement of a new wave of tariffs, which he described as necessary for long-term benefit despite short-term pain.
Crypto Market Struggles with Liquidations
Bitcoin’s price has faced considerable downward pressure, dipping $6,000 since the weekly close. Data from Cointelegraph Markets Pro and TradingView confirms that Bitcoin has now hit its lowest level since January 13, returning to the bottom of the trading range that has persisted since November. Traders such as CrypNuevo had predicted the downturn, highlighting the liquidity of the market and the market’s tendency to fill wicks formed during previous price dips. He pointed out that the $94,700 mark is a key liquidation level and could trigger a further decline toward $91,000.
In the wake of the sell-off, CoinGlass data reports $2.23 billion in 24-hour cross-crypto liquidations. The market sentiment is decidedly fearful, with the Crypto Fear & Greed Index plummeting over 30 points in just three days. Traders are now watching closely to see whether Bitcoin can hold the $90,000 level, as some analysts suggest the coin may soon find support.
Bitcoin Dominates Amid Altcoin Capitulation
As Bitcoin faces pressure, the Bitcoin dominance metric has spiked to 64.3%, reaching its highest level in nearly four years. This rise in Bitcoin dominance signals a sharp decline in altcoins, many of which have lost 20% or more of their value in the wake of the trade war headlines. The mass sell-off has driven a significant decrease in the total cryptocurrency market cap, which dropped by up to 21%, or approximately $760 billion, over the past few days.
While altcoins continue to suffer, Bitcoin has managed to stabilize somewhat. Notable traders like Roman remain hopeful that Bitcoin could bounce from its support levels near $90,000. Meanwhile, Credible Crypto remains optimistic about Bitcoin’s potential for a rebound despite the challenging market conditions. The altcoin sell-off, which has led to capitulation wicks, has resulted in Bitcoin’s market dominance climbing, as investors shift toward the relative safety of the leading cryptocurrency.
The US Trade War: A Macro Event Impacting Crypto and Stocks
The primary driver behind the current market volatility is the ongoing US trade war, which has intensified following President Trump’s decision to impose 25% tariffs on Canada and Mexico. Trump has argued that while there may be “short-term pain,” the long-term effects will benefit the US economy, which he claims has been taken advantage of by foreign nations. This aggressive trade stance has triggered a massive sell-off in risk assets, with stock markets feeling the brunt of the pain. The S&P 500 lost $1 trillion in value immediately after the trade war news broke, sending shockwaves through the financial markets.
The impact on the cryptocurrency market has been even more pronounced, with major altcoins experiencing sharp declines. For instance, Ethereum (ETH) saw a staggering 37% drop in just 60 hours following the announcement, as market participants rushed to liquidate positions. Crypto traders are now focusing on key support levels to assess whether Bitcoin can maintain its position or face further losses.
Impact on the Federal Reserve’s Plans
The economic fallout from the US trade war is already having a ripple effect on the broader macroeconomic landscape. The Federal Reserve (Fed), which has been closely monitoring inflation and interest rate policies, is now confronted with new risks arising from the trade tensions. Arthur Hayes, former CEO of BitMEX, warned that the economic situation may worsen before it improves. According to Hayes, the Fed will likely resort to quantitative easing (printing money) to stimulate the economy, a move that could eventually signal a turning point for the crypto market. In the meantime, the CME Group’s FedWatch Tool shows that the odds of a 0.25% rate cut remain low, with only a 15% chance of a rate reduction at the next Fed meeting in March.
Short-Term Bitcoin Holders at a Critical Crossroads
Another key factor influencing Bitcoin’s price action is the behavior of short-term holders (STHs). These are investors who have held their Bitcoin for less than 155 days and are generally more sensitive to market fluctuations. According to on-chain data from Glassnode, the average cost basis (or realized price) for the STH cohort is currently just under $92,000. This level is crucial, as it often serves as a significant support level during market corrections. If Bitcoin’s price falls below this threshold and flips the STH cost basis to resistance, it could signal a shift in market sentiment, potentially indicating that new investors are losing confidence in the market.
Crypto Sentiment at a Low
Crypto sentiment has taken a hit in recent days, with the Fear & Greed Index reaching its lowest level since October 2024. The index, which tracks investor sentiment across both traditional and cryptocurrency markets, has fallen by 32 points in just three days, reflecting widespread anxiety in the market. This sudden drop in sentiment is a reminder of how quickly market conditions can change, as Jesse Cohen, a global markets analyst, noted, with one tweet from President Trump capable of altering the entire market landscape.
As the crypto market grapples with uncertainty, many analysts believe that Bitcoin remains the safest bet among cryptocurrencies. However, the broader market turmoil, coupled with the looming trade war and its implications for global economics, suggests that more volatility could lie ahead.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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