Summary
The cryptocurrency market has plunged into a state of "extreme fear," with Bitcoin showing no signs of stabilization despite significant losses. This raises the question: What caused this sudden market crash?
Market Overview
Since Bitcoin fell below $90,000 on February 25, the cryptocurrency market has experienced a steep decline. Early today, Bitcoin hit a low of $82,200, its lowest since November 12, 2024. Ethereum also dropped to around $2,100, erasing all gains made since August 2024.
According to Coinglass data, over the past 24 hours, the market saw liquidations exceeding $772 million, with Bitcoin and Ethereum accounting for 60% and 17% of these losses, respectively. Many altcoins also faced massive liquidations during this period.
Key Factors Behind the Crash
Macroeconomic and Policy Factors
- Trump Administration Policy Uncertainty:
Despite initial optimism about Trump’s pro-crypto stance, his tariff policies and lack of concrete crypto legislation have fueled trade war fears, driving investors away from high-risk assets like Bitcoin. - State-Level Bitcoin Bill Setbacks:
Over 30 U.S. states proposed Bitcoin-related bills, but several, including South Dakota, Montana, and Wyoming, have rejected them. This has weakened confidence in Trump’s "crypto-friendly" promises. - Stock Market Bubble and Fed Policy:
The NASDAQ’s 4-day sell-off and the Fed’s delayed rate cuts have heightened risk aversion, pushing investors toward safer assets like the U.S. dollar.
Cryptocurrency-Specific Challenges
- Bitcoin ETF Outflows:
February saw consistent outflows from Bitcoin ETFs, peaking at $1.14 billion on February 25—the largest single-day outflow since their launch. - Ethereum’s Scaling Struggles:
Delays in the Pectra upgrade have exacerbated Ethereum’s scalability issues, contributing to its price slump. - Solana’s Meme Coin Decline:
The fading hype around meme coins like TRUMP and LIBRA, coupled with SOL’s upcoming $2 billion token unlock, has pressured Solana’s price to a 6-month low.
Security Breaches
- Bybit Hack:
On February 21, hackers stole $1.5 billion in ETH/stETH, the largest theft in crypto history. Over $685 million in ETH remains unlaundered. - Infini Attack:
A $50 million hack on February 24 further eroded investor confidence.
Market Outlook
While the crash reflects a confluence of macro pressures, institutional outflows, and security breaches, experts caution against declaring the bull market over.
Yu Jianing, Chair of the Blockchain Committee at China Communications Industry Association, views this as a "technical correction rather than a long-term reversal." Short-term risks remain, but potential policy shifts (e.g., U.S. state Bitcoin bills) could reignite growth.
FAQs
Q: Is this the end of the crypto bull market?
A: Analysts suggest it’s a correction, not a reversal. Long-term prospects depend on regulatory developments.
Q: How did the Bybit hack impact the market?
A: The $1.5 billion theft triggered panic selling, with 206K ETH already laundered and 292K ETH still held by hackers.
Q: Why are Bitcoin ETFs seeing outflows?
A: Institutional pessimism about short-term price trends led to record outflows, including a $1.14 billion single-day withdrawal.
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Source: Jinse Finance
Risk Disclosure: Markets are volatile. This content is for informational purposes only and not investment advice.