Bitcoin Plunges Over 8%, Market Confidence Crumbles: Bybit Hack, Macroeconomic Uncertainty, and Policy Delays Cited as Main Causes

Bitcoin Plunges Over 8%, Market Confidence Crumbles: Bybit Hack, Macroeconomic Uncertainty, and Policy Delays Cited as Main CausesThe cryptocurrency market has experienced dramatic volatility in recent days, with Bitcoin's price plummeting and briefly falling below $87,000, marking a daily drop exceeding 8%. This sharp downturn has triggered market panic and severely eroded investor confidence

Bitcoin Plunges Over 8%, Market Confidence Crumbles: Bybit Hack, Macroeconomic Uncertainty, and Policy Delays Cited as Main Causes

The cryptocurrency market has experienced dramatic volatility in recent days, with Bitcoin's price plummeting and briefly falling below $87,000, marking a daily drop exceeding 8%. This sharp downturn has triggered market panic and severely eroded investor confidence. This article delves into the multifaceted factors behind Bitcoin's recent crash and explores its potential impact on future market trends.

Bybit Hack Cripples Market Confidence

On February 21st, Bybit, a leading global cryptocurrency exchange, suffered its largest-ever security breach, with approximately $1.4 billion worth of Ethereum assets stolen. This event dealt a significant blow to investor confidence and heightened risk aversion in the market. According to EmberCN's monitoring, the Bybit hackers laundered $113 million worth of 45,900 ETH within 24 hours, having already moved nearly a third of the stolen funds. The hacking activity is ongoing, with the remaining funds expected to be completely transferred within the next 8 to 10 days. This incident not only resulted in substantial direct financial losses but also severely damaged investor trust in exchange security, triggering panic selling.

Macroeconomic Uncertainty Exacerbates Market Volatility

Beyond the Bybit hack, global macroeconomic uncertainty is another major contributor to Bitcoin's price decline. Increased volatility in the US stock market, with the S&P 500 failing to break the 6000-point mark, has reduced risk appetite, further suppressing speculative participation in risk assets. The cryptocurrency market, including Bitcoin, has been impacted. A report by Bitfinex notes that Bitcoin has been trading within a range of $91,000 to $102,000 over the past 90 days, with persistent stagnation in market momentum. This downward trend is attributed to macroeconomic uncertainty and Bitcoin's increasing correlation with traditional markets.

Delayed Trump Bitcoin Reserve Plan

Trump's campaign promise to establish a US Bitcoin strategic reserve, which once generated market anticipation, remains unfulfilled. On January 20th, the day of Trump's inauguration, the probability of "Trump establishing a strategic Bitcoin reserve within 100 days of his inauguration" reached 48% on the decentralized prediction platform Polymarket, but has now fallen to around 10%. This unkept promise reflects the controversies surrounding Bitcoin as a reserve asset. Bitcoin's high volatility and regulatory challenges make it unsuitable for the stable value storage function required of traditional strategic reserve assets.

Opposition is emerging not only at the federal level but also at the state level. Montana and South Dakota have rejected bills proposing Bitcoin as a state reserve asset, further fueling market concerns about Bitcoin's viability as a "national strategic asset" and directly contributing to the price drop. These events highlight the cautious attitude of some state governments towards Bitcoin reserves, stemming from concerns about its high volatility and potential risks. This could influence future decisions by other states or countries and impact market confidence.

Spot ETF Outflows Intensify Selling Pressure

Since February, the cryptocurrency market has been sluggish, experiencing a significant downturn this week. Data shows that on February 25th, US Bitcoin spot ETFs saw net outflows of $935 million, setting a record for the largest single-day outflow in both dollar and Bitcoin terms since their launch. Fidelity's FBTC saw the largest outflow at $345 million, also a record. BlackRock's IBIT saw outflows of $162 million, with a trading volume of $5.1 billion. Year-to-date, US Bitcoin spot ETF outflows have reached $2.415 billion. These significant institutional outflows have undoubtedly exacerbated selling pressure, further depressing Bitcoin's price.

Cooling SOL Ecosystem Meme Coin Market Adds to the Decline

The cooling meme coin market and the impending unlocking of a large amount of tokens have also negatively impacted market sentiment. SOL, a representative meme coin, has seen its price fall by nearly 50% in the past month. The volatile nature of meme coins makes them susceptible to market speculation, leading to heightened price fluctuations when market sentiment shifts.

Technical Indicators Show a Decline in Risk Appetite

Analysis firm TheKobeissiLetter believes that this round of cryptocurrency price declines is not caused by any single factor but rather by a liquidity crunch driven by multiple factors. These include the waning hype around SOL ecosystem meme coins, the Bybit hack, the decline in US equities, technical indicators, and an overall decline in market risk appetite. The combined effect of these factors has led to a decrease in overall market risk appetite, prompting investors to take profits or reduce their positions, further accelerating the downward trend.

Bitcoin at a Critical Crossroads: Uncertain Future Trajectory

Cryptocurrency trading platform Bitfinex believes that Bitcoin is currently at a critical juncture. After nearly 90 days of sideways consolidation, market participants are awaiting a catalyst. Bitcoin's next significant price move is likely to be influenced by macroeconomic trends and could be decisive. Some analysts predict that Bitcoin could retrace to its recent support level of $73,000 or even lower.

Matrixport predicts a technical retracement to the recent support level of $73,000. BitMEX co-founder Arthur Hayes previously stated that if Trump fails to pass his budget, the market will resume its decline to pre-election victory levels, in the $70,000-$75,000 range.

Regulatory Uncertainty: Market Confidence Recovery Will Take Time

In the short term, if regulatory uncertainty persists and security incidents continue, the market may continue its downward trajectory, and the restoration of investor confidence will take time. While the US Securities and Exchange Commission (SEC) recently dropped lawsuits against DeFi firm Uniswap Labs and exchange Coinbase, this does not eliminate regulatory risks. Regulatory uncertainty remains a significant threat hanging over the cryptocurrency market.

Long-Term Outlook: Technological Innovation and Regulatory Clarity Will Support Stable Market Development

In the long term, if technological innovation enhances security and regulations are gradually improved, some cryptocurrencies may find applications in specific areas and gain wider acceptance. However, cryptocurrencies are unlikely to replace traditional currencies and financial systems, and their expansion in market size and influence will face numerous challenges. Investors should maintain a cautious and watchful stance.

While short-term market volatility is expected to continue, in the long run, technological advancements and policy improvements could lead to stable development in the cryptocurrency market. However, investors should remain vigilant, monitor market trends, and develop appropriate investment strategies to achieve better returns in this market characterized by both risks and opportunities. The recent Bitcoin crash serves as a reminder of the extremely high risk associated with cryptocurrency investment. Any investment decisions should be based on individual risk tolerance and thorough market research.