Bitcoin, the largest cryptocurrency globally, experienced a sharp decline over the past week, losing more than 10% of its value due to escalating trade tensions between the United States and the European Union, alongside aggressive economic policies from U.S. President Donald Trump.
During today's trading, Bitcoin dropped by 2.25% to $86,338.63, reflecting intense selling pressures that have caused it to lose 20% of its value compared to its peak since Trump's inauguration in January. Here are the main reasons that led to this notable decline in the digital market:
Trump's trade policies are putting pressure on the cryptocurrency market.
After Trump's victory in the November 2024 elections, there was a wave of optimism in the digital currency market, but this optimism quickly faded as his threats to impose tariffs on the European Union escalated. This led to panic among investors, as they began to withdraw their funds from cryptocurrency ETFs, which increased the pressures on the market.
Inflation and uncertainty from the U.S. Federal Reserve hinder Bitcoin's recovery.
The U.S. Federal Reserve remains hesitant about lowering interest rates amid ongoing inflationary pressures, prompting investors to exercise caution when investing in high-risk assets like cryptocurrencies. Intense institutional selling has also affected market sentiment, raising questions about whether the current decline is merely a temporary correction or the beginning of a deeper downturn.
The Paybit exchange hack exacerbates security concerns in the digital currency market.
The challenges facing the crypto market are not limited to economic factors; security concerns have increased after the Paybit exchange was hacked last week, with hackers managing to steal $1.5 billion in Ether. This event has reignited the debate about the security of cryptocurrency trading platforms and its potential impact on investor confidence in the market.
The debate around meme coins and the performance of Trump's cryptocurrency is increasing volatility.
Pressures on the digital currency market have increased due to the ongoing debate surrounding Argentine President Javier Milei and his relationship with meme coins, leading to uncertainty among investors. Additionally, the poor performance of the cryptocurrencies launched by Trump and his wife Melania before his inauguration raised further doubts about his true stance on cryptocurrencies.
Bitcoin is facing a critical test in the coming weeks.
Although Bitcoin's dominance in the market remains high (indicating some long-term confidence), there are warnings that strong liquidations and repeated crashes reflect an extremely fragile digital market. The coming weeks are expected to be critical in determining Bitcoin's future, and whether it can withstand these pressures or will experience further sharp declines.