Bitcoin Plunges Below $89,000: 370,000 Liquidations Amidst Market Turmoil Fueled by Multiple Factors

Bitcoin Plunges Below $89,000: 370,000 Liquidations Amidst Market Turmoil Fueled by Multiple FactorsOn February 25th, the cryptocurrency market experienced a significant sell-off, with Bitcoin's price briefly dipping below $90,000, hitting a new low since mid-January and triggering a sharp global market downturn. This crash wasn't an isolated incident but rather the result of several converging factors, including the Trump administration's aggressive trade policies, geopolitical tensions, and weakening market momentum

Bitcoin Plunges Below $89,000: 370,000 Liquidations Amidst Market Turmoil Fueled by Multiple Factors

On February 25th, the cryptocurrency market experienced a significant sell-off, with Bitcoin's price briefly dipping below $90,000, hitting a new low since mid-January and triggering a sharp global market downturn. This crash wasn't an isolated incident but rather the result of several converging factors, including the Trump administration's aggressive trade policies, geopolitical tensions, and weakening market momentum. Most notably, Coinglass data revealed that nearly 370,000 traders globally were liquidated in the past 24 hours, resulting in losses totaling $1.36 billion, indicating substantial losses for a large number of high-risk speculators.

Bitcoin's price continued its descent, breaking below the $90,000 mark. As of 5:30 PM on February 25th, it stood at $88,701, representing a 7.7% drop in 24 hours. Meanwhile, other cryptocurrencies like Ethereum, Solana, and Dogecoin also suffered significant blows, with declines exceeding 10%. Market panic spread, causing extreme price volatility and severely impacting investor confidence.

Trump's Tariff Policies: A Key Catalyst for Bitcoin's Decline

US President Trump's assertive tariff policies are considered one of the primary triggers for Bitcoin's price drop. On February 24th, during a joint press conference with French President Macron, Trump stated that the US was proceeding as planned with tariffs on Mexico and Canada, and that progress was "very fast." Previously, Trump had signed an executive order imposing a 25% tariff on imports from Mexico and Canada, and a 10% tariff on Canadian energy products. Although the implementation date was later postponed by 30 days, the plan to impose tariffs remains uncertain, creating global economic uncertainty and directly impacting risk assets such as Bitcoin.

Cryptocurrency Security Incidents Exacerbate Market Fear

Beyond geopolitical factors and trade friction, recent major cryptocurrency theft cases have heightened market panic. This event reignited concerns about cryptocurrency security, prompting many investors to panic-sell, further accelerating the market downturn.

Technical Analysis: Weakening Market Momentum and Profit-Taking Pressure

Yu Jianing, co-chair of the China Communications Industry Association Blockchain Special Committee and honorary chairman of the Hong Kong Blockchain Association, noted that Bitcoin's recent oscillation between $90,000 and $100,000 reflects weakening market momentum. Since early February, Bitcoin's price has fluctuated within this range, failing to break through resistance levels, leading to profit-taking pressure. If market confidence doesn't recover quickly, Bitcoin's price may continue to consolidate at low levels or even fall below the current range.

Yu Jianing also suggested that the current downturn may be a technical adjustment rather than a reversal of the long-term trend. He pointed out that in the medium to long term, Bitcoin's price, after this adjustment, is still expected to re-enter an upward channel. He cited several potential positive factors, including continued inflow of funds attracted by ETFs, strategic allocation by institutional investors, and expectations of Fed rate cuts. These macroeconomic factors could potentially drive Bitcoin's price back up.

Divergent Global Regulatory Attitudes: Challenges to Bitcoin's Positioning

The cryptocurrency market also faces challenges from divergent global regulatory attitudes. The South Dakota legislature postponed a vote that could have allowed the state to invest in Bitcoin, effectively killing the bill, highlighting the internal divisions within the US regarding cryptocurrency regulation. Although Trump had previously touted Bitcoin as a potential national strategic reserve asset, this claim lacked widespread support within the US government.

Other countries also display significant differences in their regulatory approaches to cryptocurrencies. For example, the European Central Bank strongly opposes including Bitcoin in reserve assets, while the Czech National Bank is evaluating the possibility of allocating 5% of its reserves to Bitcoin. This regulatory divergence directly affects Bitcoin's market positioning and future prospects. Developed economies generally adopt a cautious regulatory approach, while Asia presents a stark contrast, with Japan and Singapore moving towards institutional acceptance and Hong Kong actively developing the virtual asset industry. Yu Jianing summarized that strict versus lenient regulation directly impacts the development space and innovation drive of the virtual asset market, but it also exacerbates the challenges of risk management.

Bitcoin as a Strategic Reserve: Opportunities and Challenges

The concept of Bitcoin as a strategic reserve is theoretically appealing, particularly in combating inflation and financial system instability. Bitcoin's scarcity and decentralized nature make it a potential hedging tool. However, in practice, numerous risks and obstacles remain, including Bitcoin's high volatility and inconsistent global regulatory attitudes towards cryptocurrencies. Many countries' legal frameworks have yet to fully adapt to virtual assets, and international coordination and consensus constitute a major hurdle.

Yu Jianing predicts that besides the US potentially accelerating Bitcoin reserve-related legislation under a new Trump administration, some countries experiencing high inflation, currency devaluation, or financial crises may be inclined to consider Bitcoin as a reserve asset. For instance, El Salvador, the first country to adopt Bitcoin as legal tender, despite facing external pressure, persists in purchasing Bitcoin for reserves. Other countries, such as Argentina and Venezuela, may also hold more open attitudes towards Bitcoin. Furthermore, some economies with a strong sense of financial innovation, such as some oil-rich countries in the Middle East, might consider Bitcoin as a new type of strategic reserve asset.

Conclusion: Intertwined Factors Leave Bitcoin's Future Uncertain

In summary, the recent Bitcoin crash resulted from the confluence of multiple factors, including the macroeconomic environment, geopolitical risks, market sentiment, and regulatory uncertainty. While some long-term positive factors remain, short-term market volatility is likely to persist, and Bitcoin's future trajectory remains uncertain. Investors need to closely monitor market developments, make cautious decisions, and effectively manage risk.