Bitcoin’s recent surge following Donald Trump’s election victory has evaporated, with the cryptocurrency now trading below levels seen before the U.S. Presidential election. A confluence of factors – tightening liquidity, concerns about the U.S. Economy, and uncertainty surrounding Federal Reserve policy – are driving the sell-off, prompting analysts to warn of further potential declines.
The decline in Bitcoin’s price is occurring alongside weakness in other digital assets, reflecting broader investor anxieties about valuations in the technology sector and the trajectory of interest rate cuts by the Federal Reserve. The cryptocurrency has erased all post-election gains, falling below $62,000 at one point, a level not seen since before the election, according to reports.
“This market has been in a downtrend for months, and it hasn’t ended,” said Thomas Probst, an analyst at crypto data firm Kaiko. He noted that reduced liquidity is exacerbating price swings, even with relatively small trading volumes. The lack of readily available capital amplifies the impact of selling pressure, creating a more volatile trading environment.
A particularly sharp sell-off occurred on , after Donald Trump proposed Kevin Warsh as the next Federal Reserve chair. This sparked fears that the Fed might reduce the size of its balance sheet, potentially dampening investment appetite for Bitcoin. The price briefly plunged more than 20% before partially recovering the following day.
This volatility raises questions about Bitcoin’s near-term outlook. Previously, the crypto market experienced a significant liquidation event in October, triggered by Trump’s announcement of increased tariffs on Chinese goods. That event drained liquidity from the market, and a full recovery has yet to materialize. The current downturn echoes those concerns, highlighting the sensitivity of the crypto market to geopolitical and economic developments.
Denny Galindo, an investment strategist at Morgan Stanley Wealth Management, suggested that the sharp price declines late last year marked the bursting of a bubble fueled by leverage in the crypto market. The unwinding of leveraged positions contributed to the downward pressure on prices, as investors were forced to sell assets to cover margin calls.
Despite the Trump administration’s generally supportive stance towards cryptocurrencies – and a previous contribution to pushing Bitcoin to over $125,000 in October – positive policy signals in have failed to halt the recent downturn. Bitcoin has now fallen below $61,000, its lowest level since before the Trump election.
However, some analysts believe the market may be approaching a bottom. James Butterfill, head of research at CoinShares, noted that selling from large Bitcoin holders, often referred to as “whales,” is beginning to slow, and some investors are viewing the decline as a buying opportunity. This suggests a potential shift in sentiment, as some market participants anticipate a rebound.
Liquidity conditions remain a key concern. Probst pointed out that the amount of Bitcoin readily available for trading near current prices has continued to decline, from over 8 million dollars in to around 5 million dollars currently. This reduced liquidity means that even relatively small trades can have a disproportionate impact on price movements.
Andrew Moss, head of digital asset research at Jefferies, cautioned that the market should prepare for continued short-term volatility, as Notice no clear signals yet that Bitcoin has reached a bottom. The uncertainty surrounding the Federal Reserve’s policy path and the broader economic outlook contribute to this cautious outlook.
Bitcoin’s correlation with the stock market, particularly during periods of global financial volatility, has increased. This makes its price more sensitive to international economic and political factors. Recently, Bitcoin experienced a gain of over 10%, breaking through the $70,000 level, coinciding with a recovery in U.S. Technology stocks.
During the Trump era, investors had anticipated greater clarity on crypto policy, including plans for a government Bitcoin reserve. While Trump signed an executive order establishing a reserve from seized assets, the government has not pursued widespread Bitcoin purchases as some in the market had expected. This lack of concrete action has contributed to the current uncertainty.
