The main reasons for Bitcoin's sharp decline on February 25, 2025, are as follows:
Policy and Regulatory Factors
- Investment Bill Stalled: On February 24, lawmakers in South Dakota voted to postpone the HB 1202 bill, which would allow state-level investments in Bitcoin, until the 41st day of the state legislative session. Since the session does not exceed 40 days, the bill has effectively been killed. The Montana House of Representatives also voted against a bill on February 22 that could have made Bitcoin a state reserve asset, raising market doubts about Bitcoin as a 'national strategic asset' and undermining investor confidence.
- Regulatory Expectations Tighten: The EU's new sanctions against Russia have for the first time included cryptocurrency exchanges on the sanctions list, signaling a potential tightening of regulations, which has led investors to worry and sell off Bitcoin.
Market and Capital Factors
- Previous Uptrend Weak: Bitcoin has been consolidating in the range of $91,000 to $102,000 for about three months, lacking upward momentum, resulting in accumulated pressure for a correction in the market.
- Capital Outflow Pressure: Last week (February 17 to February 21), Bitcoin spot ETFs experienced a net outflow of capital, totaling $553 million, and the withdrawal of funds has exerted downward pressure on Bitcoin's price.
Safety and Trust Factors
- Hacking Incident: The well-known cryptocurrency exchange Bybit was hacked, resulting in the theft of over $1.4 billion in virtual currency assets. This incident has raised concerns about the security of centralized exchanges, undermining investor confidence in the cryptocurrency market.
Macroeconomic and Trade Factors
- Trade Tension Concerns: On February 21, U.S. President Trump stated that tariffs on Canada and Mexico would be imposed as scheduled, and he mentioned that a reciprocal tariff plan is being promoted. The market's concerns over a 'trade war' have intensified, leading to increased risk aversion and prompting investors to sell off risk assets such as Bitcoin.
Market Sentiment and Leverage Factors
- Cautious Market Sentiment: Matrixport released a chart indicating a high likelihood of further declines in Bitcoin, and this decline is occurring during a period of sluggish trading, with limited demand for buy-the-dip strategies, resulting in cautious market sentiment and investors following suit in selling off.
