Author: Blockhead Compiled by: Bai Hua Blockchain
Due to the uncertainty of US tariffs, and exacerbated by the $150 million Ethereum hack incident at the Bybit trading platform last week, the loss of confidence among cryptocurrency investors has led to Bitcoin falling below $90,000 and reaching its lowest point since November 18 on Tuesday.
Bitcoin fell more than 7% to around $87,200, a drop of over $20,000 from the peak of over $109,000 set on the day of Donald Trump's inauguration last week.
1. Macroeconomic Environment
As the US economy shows signs of weakening, concerns about a recession have resurfaced.
There is growing evidence that Americans' anxiety about the economic future has intensified due to the uncertainty of President Trump's policies. US consumer confidence plummeted sharply last month, the largest decline since August 2021.
Americans are cutting back on spending: According to a recent survey by Wells Fargo, more than half of consumers have delayed major life decisions due to concerns about the economic outlook and the consequences of Trump's tariff threats.
One-sixth have postponed further education plans, one-eighth have postponed retirement plans, and about one-third have postponed home purchase plans.
As a reflection of recession concerns, safe-haven government bond prices have risen sharply, with yields falling to their lowest level in two months.
Exacerbating these concerns is Trump's renewed insistence on Monday, just before the deadline, to impose a 25% tariff on imports from Canada and Mexico, which had been postponed last month.
Smaller Altcoins have been hit much harder than Bitcoin, which has fallen about 8% in the past week. According to CoinGecko data, the value of Doge, Solana and Cardano Token has declined by about 20%.
Sentiment in the crypto market has been generally gloomy since the beginning of the year, particularly in recent weeks due to the volatility around meme coins and the recent Bybit hack incident, further exacerbating this pessimistic atmosphere. The recent drop in cryptocurrency prices is not surprising after the largest hack in history.
The current macroeconomic situation is also putting pressure on crypto investments. The greater concern is that a small but quite worrying trend in risk assets may trigger a larger sell-off in the crypto market. Wall Street is also not optimistic, with the "Big Seven" stocks entering a correction zone.
Tuesday was a turbulent day for the US stock market, with the market fluctuating at record levels for most of 2025. The seven giants that drove the US stock market to a 54% rise in two years have fallen sharply.
On Tuesday, the Bloomberg "Big Seven" index fell 3.4%, now down more than 10% from the record high set on December 17. During this period, the total market value of these seven companies has shrunk by $1.6 trillion. Tesla is one of the biggest decliners, down 37%.
Despite the stock market decline, we are seeing a significant decoupling between Cryptocurrencies and the US stock market. This year, the correlation between Bitcoin and the Nasdaq has dropped sharply, and the overall market sentiment towards Cryptocurrencies is currently negative.
"The crypto market is mired in negative sentiment, mainly due to a series of meme coin scandals and rug pulls," said Martin Leinweber, Head of Digital Asset Research & Strategy at MarketVector Indexes and author of "Mastering Crypto Assets." He added, "High-profile scams like the Libra Coin incident in Argentina, Trump Coin, and other meme Tokens have severely undermined investor confidence, leading to a significant price drop in Solana and other Altcoins."
Although Solana remains one of the most scalable, low-cost, and fast blockchains, it is now referred to as the "Memecoin Chain." Due to various FUD (fear, uncertainty, and doubt), a large amount of capital has flowed from Solana to Ethereum and other networks. But Solana's core advantages still exist: it is not just a hub for meme coins, but also hosts DeFi, AI applications, real-world assets (RWA), and next-generation financial tools.
Meanwhile, prior to Tuesday's plunge, Bitcoin prices had been fluctuating in a narrow range below $100,000, leading many traders to believe the crypto bull market has ended, prompting them to sell Bitcoin.
But is this really accurate?
Source: Total Return Index (Baseline = 100), MarketVector Indexes
The changing of US crypto policy has exacerbated the shift in market sentiment, and the "decoupling" between Cryptocurrencies and the traditional stock market is also intensifying. Leinweber said, "The breakdown in the correlation between Cryptocurrencies and the stock market is very unusual, especially given the current macroeconomic environment still favoring risk investments."
With the weakening of the US dollar, the head of MarketVector Indexes expects Cryptocurrencies and other risk assets to benefit as they have in the past. He said, "Considering this situation, Cryptocurrencies are unlikely to remain depressed for long. Capital flowing into the stock market will eventually return to the digital asset market."
2. Cryptocurrency Bottom: Has the Bottom Been Reached?
Leinweber said that currently over 93% of the top 100 Cryptocurrency Tokens are trading below their 90-day moving average. This severe market condition typically occurs before a market bottom, rather than persisting long-term.
The market indicator - the Crypto Fear & Greed Index, which tracks social media activity, volatility, trends, and prices - has recently fallen to a five-month low of 25, reflecting the growing pessimism in the market. With the uncertainty of Trump's tariff policy, Cryptocurrency prices continue to decline.
Some analysts are starting to consider whether it's time to "buy the dips." Looking ahead, Standard Chartered's Global Head of Digital Assets Research, Geoffrey Kendrick, said Bitcoin may benefit from the decline in US Treasury yields, a change driven by a shift to risk-averse sentiment in the market following last Friday's PMI report, and a potential rebound in the medium term.
"But it's not time to buy the dips yet, the market may drop to around $80,000," Kendrick added.
Bernstein's analysts reiterated their forecast for Bitcoin to reach $200,000 by year-end, and traders are closely watching the upcoming US inflation data for potential bullish signals, especially as the data trends towards the Fed's target.
However, Trump's policies have already begun to negatively impact crypto assets and the broader risk market. The uncertainty of whether tariffs are a negotiating tactic or an actual threat is making many investors uneasy.
Michael Hartnett, strategist at Bank of America, said "skepticism about the trajectory of the S&P 500" is growing as market risks continue to increase.
Even so, the benchmark US index is only 2.6% below the record high set last week.
In an interview with Bloomberg TV today, Hartnett warned that if stock prices fall another 6%, the government may take action to stop the decline.
Meanwhile, Elon Musk's "Government Efficiency Department" is still actively seeking government positions and budget cuts in Washington. Investors are trying to quantify the impact of this purge on the Federal Reserve's interest rate trajectory, with a clear sense of market pessimism.
Bloomberg economist Anna Huang said that if DOGE can achieve a $100 billion budget cut, it would be enough to reduce the consumer price index by 0.2 percentage points. If the reduction is larger, reaching $600 billion, this would be equivalent to a reduction of 0.8 percentage points. She believes that if this happens, the Federal Reserve will have to cut interest rates further. "Elon is underestimated, expected to cut interest rates in 2026," Anna said.
After Trump's latest tough rhetoric on tariffs and Beijing, concerns about stricter chip restrictions on China have caused semiconductor stock prices to plummet. Intel and Nvidia's stock prices fell 1.5% and 2%, respectively, while the Netherlands' ASML and ASMI fell 2%. Tokyo Electron in Japan fell 4.9%. Stocks related to cryptocurrencies are also falling as the price of Bit fell below $90,000, hitting a low since mid-November. This reversed some of the stock market gains after Trump's re-election. Microstrategy's stock price fell more than 6%, and Coinbase fell more than 5%.
3. Analysis of US Treasury Yields
During Trump's first term, the stock market was the most important indicator for this real estate tycoon-turned-president. However, as Trump's second term enters its second month, the White House's focus has shifted to a new indicator: the 10-year Treasury yield.
Musk and Treasury Secretary Scott Bessent mentioned lowering market borrowing costs as a goal, which echoes the policies of President Bill Clinton's era.
They need to focus on the bond market, especially the 10-year Treasury yield, as it directly affects the borrowing costs of homebuyers and large US companies. It is unclear how the market will react to Bessent's proposed deficit reduction and Musk's criticism of government bureaucracy. Investors still maintain some expectations for the possibility of success.
Over the past few weeks, US Treasuries have outperformed interest rate swaps of the same maturity. However, most bondholders are still looking for observable, substantive results.
Currently, the trend of risk aversion still exists, and the overall macroeconomic dynamics also show certain pressures.
