Bitcoin fell by more than 5% on Friday 28 February, hitting its lowest level since 11 November 2024, amid uncertainty over the Trump administration’s economic and trade policies and growing investor distrust in the cryptocurrency market. The world’s largest cryptocurrency, in terms of market value, fell to $79,666, breaking through the $80,000 level for the first time in three months.
Bitcoin’s devaluation comes amid a number of factors that have been putting pressure on the sector, including the impact of a hacker attack on the Bybit platform, which resulted in the theft of approximately $1.5 billion in ether, and greater risk aversion in the financial markets.
Loss of momentum and uncertainty about US economic policies
Since mid-December 2024, Bitcoin has lost around 25% of its market value after reaching a peak of $105,000, driven by optimism about a possible regulatory easing for the crypto-asset sector in the United States. However, expectations that the Trump administration would promote a more favourable environment for the sector have cooled, especially due to the lack of concrete measures following the initial appointments of pro-crypto figures to strategic positions.
Joshua Chu, co-chairman of the Hong Kong Web3 Association, told Reuters that Bitcoin’s break below $80,000 demonstrates that the initial enthusiasm about friendlier regulation has come to an end. According to Kyle Rodda, senior analyst at Capital.com, the market has started to lose momentum due to the lack of new positive news to support the valuation narrative.
In addition, the recent correction in the US stock markets has also affected cryptocurrencies. Bitcoin continues to trade as a highly volatile asset, with an increasing correlation to the large technology companies listed on Wall Street. The fall in the shares of the so-called “Mag 7 ’ – Microsoft, Apple, Nvidia, Alphabet (Google), Amazon, Meta (Facebook) and Tesla – has contributed to a massive sell-off in speculative assets, including cryptocurrencies.
Hacker attack and impact on the crypto-asset market
Another factor that increased risk aversion was the massive hack on the Bybit exchange, the second largest cryptocurrency trading platform after Binance. The attack resulted in the loss of $1.5 billion in ether, which represents one of the largest thefts ever recorded in the blockchain sector, according to analysis firm Elliptic. The vulnerability in centralised exchanges has reignited fears about the security of the sector, leading many investors to withdraw funds from trading platforms for Bitcoin and other crypto-assets.
The uncertainty is also reflected in the outflow of capital from Bitcoin-backed exchange-traded funds (ETFs), indicating that institutional investors are reducing exposure to the digital asset.
Impact of US monetary and trade policy
Pressure on Bitcoin and other risky assets also comes from the global macroeconomic environment. The Federal Reserve has signalled that it intends to make only one interest rate cut in 2025, contrary to initial expectations of a more expansionary monetary policy. This factor keeps the dollar strong and Treasury bond yields at high levels, reducing Bitcoin’s attractiveness as a store of value.
In addition, the new trade tariffs imposed by President Donald Trump have increased fears of a negative impact on the global economy. The US government has announced that, as of 4 March, it will implement a 25% tariff on imports from Canada and Mexico, as well as new taxes on Chinese products. The worsening trade tensions have increased demand for more traditional safe-haven assets such as US Treasury bonds, reducing interest in cryptocurrencies.
The Central Bank of Brazil also released information on the technological challenges faced in the pilot project for its Drex digital currency, which could influence investor confidence in the digital finance sector in emerging markets.
Outlook for Bitcoin
Experts in the sector point out that the current downward movement in Bitcoin reflects a combination of macroeconomic, regulatory and technical factors. According to Reuben Conceicao, Director of Strategy at Metasig, speaking to Reuters, uncertainty over US tariffs, concerns about global geopolitics and the impact of the Bybit hack are undermining investor confidence in the cryptocurrency market.
Although many analysts remain optimistic in the long term, the Bitcoin market remains under pressure in the short term, with strong resistance in the range between $65,000 and $70,000. The asset’s trajectory will largely depend on the Trump administration’s future decisions regarding the crypto-asset sector, the Fed’s monetary policies and the evolution of global demand for digital assets as a store of value.
O Económico
