Trump Tariffs and Market Correlation Drive 4.5% Drop

TLDR

• Bitcoin price dropped below $91,000, reaching three-month lows
• New tariff announcements from President Trump created market uncertainty
• Over $900 million in long positions liquidated during the market drop
• Institutional investors withdrew $552.5 million from Bitcoin ETFs in recent week
• Technical analysis shows Bitcoin testing critical support between $90,000-$92,000

The price of Bitcoin has fallen below the $91,000 mark on February 25, 2025, reaching its lowest point since November 2024. This represents a drop of more than 4.5% in just 24 hours, contributing to a broader cryptocurrency market decline that has seen the total market capitalization decrease by 8% from $3.31 trillion to around $3.09 trillion.

Monday’s price action resulted in Bitcoin’s steepest single-day decline since January 25, when the cryptocurrency lost over $5,000 in value during a 5.2% drop. The downward movement wasn’t isolated to Bitcoin, as other major cryptocurrencies also experienced heavy losses, with Ethereum dropping 8.5% to below $2,500 and XRP falling 9% to $2.25.

The market downturn triggered a wave of liquidations, with nearly $1 billion worth of positions being closed out. Long Bitcoin positions accounted for $891.52 million of these liquidations, with Bitcoin-specific long bets making up $277 million of the total. This liquidation cascade has further accelerated the price decline across the cryptocurrency market.

Technical Analysis

From a technical perspective, Bitcoin is currently testing the lower boundary of its three-month consolidation range between $90,000 and $92,000. The previous test of this level in early February did not result in a strong upward correction. If the current support level fails to hold, analysts are looking at the 200-day exponential moving average around $86,000 as the next potential support zone.

A key factor behind Bitcoin’s recent price drop has been President Donald Trump’s announcement regarding new tariffs. On February 24, 2025, during a news conference with French President Emmanuel Macron, Trump confirmed that his administration would move forward with planned 25% tariffs on imports from Canada and Mexico as scheduled. Additionally, a 10% tariff on Chinese goods was announced, adding to market concerns.

These tariff announcements have raised fears about increased inflation, potentially reversing progress made in controlling inflation over the past two years. The uncertainty around these economic policies has led investors to move away from risk assets like cryptocurrencies as they reassess their investment strategies in light of changing economic conditions.

Bitcoin’s price movements have shown an increasing correlation with traditional financial markets, a trend noted in Bitfinex’s February 24 Alpha report. The S&P 500 has decreased by 2.3% over the last five trading days, while the Nasdaq Composite has fallen by 4% during the same period. This decline in broader equity markets has had a negative impact on risk assets, including the cryptocurrency sector.

Institutional demand for Bitcoin through spot exchange-traded funds (ETFs) has also slowed down considerably. According to Bitfinex, Bitcoin ETFs experienced outflows on every trading day for the week ending February 21, with total outflows reaching $552.5 million. This consistent withdrawal pattern suggests that large institutional investors are either taking profits or moving their capital elsewhere due to the uncertain market environment.

Market sentiment has been further affected by comments from crypto industry figures. Former BitMEX CEO Arthur Hayes warned of an approaching “goblin town” for Bitcoin, a term used to describe a severe price crash. Hayes suggested that hedge funds holding positions in BlackRock’s iShares Bitcoin Trust (IBIT) could be a catalyst for further price drops.

According to Hayes, these funds have taken long positions in IBIT while shorting CME Bitcoin futures to generate yields higher than short-term U.S. Treasury bonds. However, as Bitcoin’s price declines and the basis (difference between spot and futures prices) narrows, these funds may unwind their positions by selling IBIT and buying back futures contracts. Hayes believes this could drive Bitcoin’s price down to around $70,000, particularly during U.S. trading hours.

The CEO of 10x Research, Markus Thielen, noted that

“Bitcoin has broken the critical $95,000 level, a move that could have important implications in the coming weeks. With several key factors at play, this is not the time for complacency—market dynamics are shifting, and traders should remain vigilant.”

Bitfinex analysts have described Bitcoin as being at a “critical juncture” after almost 90 days of trading within a tight range between $91,000 and $102,000. This extended consolidation period reflects a lack of momentum needed for a sustained breakout in either direction. The report states,

“The momentum required for a sustained breakout has been lacking, and this has led to a period of contraction and consolidation across almost all major crypto assets.”

A February 21 University of Michigan Consumer Survey found that U.S. consumer sentiment in February dropped by 10% from January, reaching a 15-month low. This decline indicates growing concerns about inflation and economic uncertainty that could lead to reduced consumer spending, adding another layer of pressure to risk assets like cryptocurrencies.

Despite the current downtrend, there remains a strong accumulation of buy orders at the current price level, which could provide some resistance against further declines. If the $90,000 support level holds, we might see a rebound; if it breaks, further price drops may occur before any recovery takes place.

Traders and investors are now watching closely to see whether this dip represents a buying opportunity or the beginning of a deeper correction. The future price movement may depend largely on how markets process Trump’s tariff announcements and whether institutional demand for Bitcoin ETFs recovers in the coming weeks.

For now, the market is waiting for more clarity on U.S. economic policies and their potential impact on inflation. Any reduction in these concerns, combined with a return to positive sentiment in global markets, could help drive a recovery for Bitcoin and the wider cryptocurrency market.

As of this writing, Bitcoin is trading at $90,784, and the market remains highly volatile as participants adjust their strategies in response to the evolving economic landscape and changing market dynamics.