The cryptocurrency market has entered turbulent waters as digital assets witness sharp declines, with Bitcoin slipping below the crucial $100,000 threshold. Therefore everyone is asking the question, why is crypto downtoday? This downturn highlights the complex interplay between macroeconomic forces, regulatory dynamics, and investor sentiment.
Bitcoin Breaches the $100,000 Mark Amid Market Uncertainty
Bitcoin, the flagship cryptocurrency, has suffered a significant downturn, falling to approximately £79,928.46 ($98,918.41). This decline marks a reversal from its historic highs recorded in early 2024 when enthusiasm around the approval of the first US Bitcoin Exchange-Traded Fund (ETF) drove prices to unprecedented levels. However, today’s slump underscores the fragility of digital asset markets, which remain highly sensitive to external pressures.
Ethereum has fared marginally better, experiencing a slight uptick of 0.07% to £2,375 ($3,057.80). Meanwhile, other major cryptocurrencies display mixed responses: Ripple (XRP) has gained 1.06% to £2.22 ($2.76), reflecting investor optimism following its reduced SEC penalty, whereas Solana and Cardano have seen declines of 7.87% and 6.99%, respectively.
Geopolitical Headwinds: Trump’s Tariffs Spark Market Volatility
A key driver of the current sell-off is the introduction of sweeping new tariffs by US President Donald Trump. The administration’s decision to impose a 25% levy on Canada and Mexico and a 10% tariff on China has reignited fears of an escalating trade war. Market analysts suggest that the ripple effects of these measures have swiftly extended beyond traditional equities, impacting risk-on assets like cryptocurrencies.
Traders are now assessing potential supply chain disruptions, retaliatory economic policies, and their broader implications for liquidity. The resulting sell-off has wiped out an estimated $200 billion from the total crypto market capitalisation in a matter of days.
Institutional Adoption and Liquidity Risks
The ETF approval in January 2024 was widely seen as a watershed moment for Bitcoin’s institutional adoption. However, despite this milestone, the current downturn highlights lingering liquidity risks. The involvement of major players like BlackRock and Fidelity has not shielded digital assets from volatility, and some analysts argue that large institutional positions exacerbate price swings during downturns.
Additionally, Bitcoin’s halving event on 20 April 2024—historically associated with price appreciation due to reduced supply—has yet to provide a stabilising effect. This raises concerns about whether the expected long-term bullish trend will materialise or whether external economic conditions will continue to suppress upward momentum.
Bank of England and Dollar Strength: A Pressuring Factor
Another major factor weighing on the crypto market is the broader macroeconomic environment, particularly the strength of the US dollar. The Dollar Index (DXY), a measure of the greenback against a basket of foreign currencies, has surged to 108.50, marking a 2.1% increase for February alone.
This appreciation places downward pressure on Bitcoin and other cryptocurrencies due to their inverse correlation with the dollar. A stronger dollar typically signals tighter liquidity conditions, making risk assets less attractive for investors. Additionally, the Federal Reserve’s decision to maintain interest rates at 4.25%–4.50% has added to market uncertainty, delaying anticipated rate cuts that could have provided relief to speculative assets.
Mass Liquidations Compound Market Stress
The sharp decline in crypto prices has triggered a cascade of liquidations, with over $700 million in leveraged positions being wiped out in the past 24 hours. More than 250,000 traders have faced forced liquidations, with the largest single liquidation event—a $11.84 million ETH-USDT position—occurring on Binance.
This deleveraging cycle intensifies selling pressure as margin calls force traders to close positions at a loss, exacerbating downward momentum. Bitcoin’s market dominance has also dipped to 58.09%, reflecting a shift in investor allocations amid heightened volatility.
Regulatory Uncertainty: The Balancing Act Between Oversight and Growth
While Trump’s re-election in November 2024 initially infused optimism into the market—owing to his administration’s pro-Bitcoin stance—the regulatory landscape remains a double-edged sword. The President’s proposal to establish a US Bitcoin reserve signals a strategic push towards legitimising the digital asset, but concerns persist over regulatory tightening.
SEC Chairman Gary Gensler continues to advocate for stringent oversight, citing fraud risks as a primary concern. Despite Ripple’s recent victory in reducing its SEC-imposed penalty from £1.5 billion to £112 million, the broader regulatory outlook remains uncertain. Future enforcement actions could dictate the pace of institutional participation in the sector.
Broader Implications: A Long-Term View
Despite current turbulence, long-term market projections remain optimistic. The global cryptocurrency market, previously valued at £2.11 trillion in 2023, is expected to grow to £7.36 trillion by 2030. Institutional engagement from firms such as Coinbase, Fidelity, and BlackRock is playing a crucial role in shaping the industry’s infrastructure and regulatory framework.
Furthermore, the potential creation of a national Bitcoin reserve could mark a transformative moment for digital assets, aligning them more closely with sovereign wealth strategies. However, the extent of regulatory constraints will determine whether this vision materialises.
Navigating an Uncertain Path Forward
The cryptocurrency market finds itself at a critical juncture, caught between bullish long-term projections and short-term geopolitical and economic headwinds. While institutional adoption and regulatory clarity will play defining roles in shaping the next phase of growth, the immediate outlook remains fragile.
The convergence of trade policy shifts, dollar strength, liquidation events, and regulatory developments will dictate the pace of market recovery. Investors must brace for further volatility as digital assets navigate the broader macroeconomic landscape.
As crypto markets adjust to these evolving conditions, the long-term viability of Bitcoin and its peers will hinge on their ability to withstand external pressures while maintaining their value proposition as alternative assets in an increasingly uncertain financial world.