After a period of consolidation, the cryptocurrency market experienced a price drop last night and into this morning. Bitcoin fluctuated lower within just a few hours, quickly falling below the $85,000 mark, from around $89,000 on the 28th to around $82,000 on the 30th, an overall drop of about 7-8%, reaching its lowest point since November last year.
This sharp pullback, which caught investors off guard, was the result of a combination of factors, including a collapse in sentiment towards tech stocks, escalating geopolitical risks, and a depletion of liquidity within the crypto space.
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The recent decline in the cryptocurrency market was largely triggered by the opening of the US stock market. According to foreign media reports, global markets entered a downward trend immediately after the US stock market opened on Thursday. The core driving force behind this decline was the earnings report released by tech giant Microsoft after the US stock market closed the previous day.
Despite the software giant's revenue actually growing 17% in the fourth quarter, slowing growth in its cloud division and massive spending in artificial intelligence raised concerns among investors about over-investment in AI within the tech industry. Microsoft's stock price plummeted 12% after the earnings report was released, dragging down the entire tech sector.
After the US stock market opened on Thursday morning, the Nasdaq Composite Index fell by about 2.3%, and the S&P 500 Index declined by about 1.5%. The across-the-board collapse of technology stocks quickly spread to the cryptocurrency market. The price of Bitcoin plummeted in a short period of time, hitting a low of $81,000. According to data from CoinGecko, Bitcoin's recent trading price has fallen by a cumulative 6% compared to a week ago.
Cryptocurrencies were among the first risk assets to be sold off by the market.
Timot Lamarre, Director of Market Research at Unchained, points out that while many consider Bitcoin to be the world's strongest currency, the vast majority of market participants still view it as a trading instrument for tech stocks. This perception makes it difficult for Bitcoin to remain unaffected when traditional tech stocks suffer significant setbacks. Historical data also confirms this, showing a significant correlation between Bitcoin and the US stock market, particularly tech stocks. When investors have doubts about the future of the tech industry, cryptocurrencies often become one of the first risky assets to be sold off.
Meanwhile, Ethereum fell by more than 7% in a single day, with its trading price dropping to around $2,729. Besides these two major cryptocurrencies, other crypto assets ranked in the top ten by market capitalization also generally experienced declines of 4% to 6%.
Among major cryptocurrencies, popular tokens such as XRP and Solana also experienced similar single-day declines. Overall, the total market capitalization of the cryptocurrency market fell by approximately 5%, currently standing at $2.79 trillion.
Large-scale liquidation events create a vicious cycle.
In addition, this sharp drop also triggered a large-scale leveraged liquidation event. According to CoinGlass data, in the past 24 hours, more than 200,000 traders' positions were forcibly liquidated, with a total liquidation amount exceeding $813 million. Among them, long positions accounted for the vast majority of the liquidation volume, reaching nearly $700 million, indicating that there were a large number of bullish bets in the market before the price crash.
DLNews data shows that $313.7 million in bets on rising Bitcoin prices were liquidated that day, with another $327 million in Bitcoin-related positions wiped out in the past 24 hours. Ethereum followed closely behind, with $134 million in liquidations.
Such large-scale liquidation events often create a vicious cycle.
When prices begin to fall, the forced liquidation of leveraged positions further exacerbates selling pressure, pushing prices even lower and triggering more liquidations. This avalanche effect is particularly pronounced in illiquid market environments, causing prices to fall much faster than market expectations.
The instability in the Middle East has triggered multiple macroeconomic risk factors.
In addition to the drag from technology stocks, multiple macroeconomic risk factors are also putting pressure on the market. Tensions between the US and Iran are escalating again. According to Reuters, US War Secretary Pete Hegseth stated today that regardless of President Trump's decision regarding Iran, the US military is prepared to carry out missions to ensure that Tehran does not develop nuclear weapons capabilities. "They should not seek nuclear capabilities, and whatever the president expects of the War Department, we are prepared to accomplish our mission."
Some U.S. officials have also revealed that Trump is evaluating various options but has not yet decided whether to take military action against Iran. However, Trump has repeatedly warned that the United States will take action if Tehran resumes its nuclear program.
Meanwhile, the risk of a US government shutdown is also being factored into market pricing. With negotiations remaining deadlocked before key deadlines, the lack of a last-minute agreement could lead to operational disruptions, delayed payments, and reduced near-term fiscal clarity for several federal agencies. Historical data shows that Bitcoin prices have experienced significant declines during the past three government shutdowns, with drops reaching as high as 16%.
The cryptocurrency market is structurally fragile, with deeper downside potential and a less likely rebound.
Finally, the inherent fragility of the crypto market structure is the most important factor attributable to the downtrend. The US spot Bitcoin ETF has seen net selling of approximately 4,600 Bitcoins so far this year, compared to a net inflow of nearly 40,000 Bitcoins in the same period last year. ETFs should have been the most stable source of buying in this cycle; now that this support has disappeared, the rebound has lost momentum, and the decline has become more severe due to a lack of buying support.
Meanwhile, retail investors are also withdrawing. On-chain data shows that small transactions ranging from $0 to $10,000 have shrunk dramatically in the past month, with not only buying slowing but also a substantial decrease in the number of participants. When ETF buying disappears and retail investors leave, the market is left with only short-term traders and leveraged speculators, inevitably leading to increased volatility.
The crypto market is maturing, but its structure remains fragile.
Furthermore, according to Beincrypto, most Bitcoin holders are currently still in a profitable position. The Bitcoin loss supply indicator is historically low, meaning a large amount of Bitcoin has not yet experienced real losses. This often indicates that Bitcoin will fall further rather than having bottomed out. "Only when the price continues to decline and more holders turn to losses will panic selling truly begin."
However, according to Pantera Capital's outlook for this year's market, historically, the current decline in non-Bitcoin tokens has lasted for about 12-14 months, similar to the bear markets of 2018 and 2022. Market sentiment has also been compressed to near capitulation levels, which may mean that we are close to a cyclical bottom.
Despite the increasing maturity of the cryptocurrency market, it still couldn't withstand the combined effects of multiple negative factors. While factors such as the US stock market sell-off, US-Iran tensions, and another government shutdown catalyzed the sharp decline, the liquidity crunch caused by ETF outflows and reduced retail demand points to an already fragile market structure.
If subsequent earnings reports from tech stocks fail to convey strong confidence, or if geopolitical tensions worsen further, Bitcoin and the crypto market may need to undergo a deeper correction before they can recover.
