A sharp sell-off has sent Bitcoin tumbling under $90,000, leaving investors wondering what comes next. Is this a temporary dip or a sign of deeper trouble?
Bitcoin has fallen below $90,000, its lowest point this year. The sudden drop has triggered panic across the market, with billions of dollars flowing out of Bitcoin exchange-traded funds.
At the same time, global economic concerns, including new tariffs introduced by the United States, have added pressure to financial markets. Investors are now questioning whether Bitcoin can recover or if more volatility lies ahead.
Fear Spreads as Selling Pressure Increases
The steep decline in Bitcoin’s price is largely driven by investor fear and uncertainty. One major factor is the announcement of new tariffs on imports from Canada and Mexico, set to take effect in March 2025.
President Donald Trump’s decision to move forward with these trade measures has raised concerns about inflation and economic stability.
Businesses that rely on imported goods are now facing potential cost increases, leading to broader market unease. Financial markets, including the cryptocurrency sector, have responded with caution.
Higher costs for businesses could lead to rising inflation, which may prompt the Federal Reserve to keep interest rates high for longer. For investors, this means reduced liquidity and a lower appetite for riskier assets like Bitcoin.
At the same time, Bitcoin exchange-traded funds have seen a record $1 billion in outflows. This marks the sixth consecutive day of withdrawals, with total outflows exceeding $2 billion.
Large institutional investors appear to be adjusting their positions, leading to increased selling pressure in the market.
Profit-taking is another factor contributing to Bitcoin’s decline. After a strong rally in 2024, some investors are cashing in their gains, especially as momentum slows down.
The combination of institutional rebalancing, economic uncertainty, and profit-taking has created a wave of selling that pushed Bitcoin below the key $90,000 mark.
Can Bitcoin Recover from This Drop?
Despite the sharp sell-off, some analysts believe Bitcoin still has the potential to recover. One of the main arguments for a rebound is the global M2 money supply, which measures the amount of money circulating in the economy.
A rise in M2 has historically supported Bitcoin’s price by increasing liquidity in financial markets. Another factor to consider is Bitcoin’s long-term supply dynamics.
Source: Tradingview
The April 2024 halving event reduced the number of new Bitcoins entering circulation, which could help balance out selling pressure over time.
Historically, halvings have been followed by periods of price appreciation, although short-term volatility is common.
Investor sentiment will also play a crucial role. If economic concerns ease or central banks adjust their policies to support growth, Bitcoin could see renewed interest from both retail and institutional investors.
While some are currently selling, others may view the recent dip as a buying opportunity, especially if macroeconomic conditions become more favourable.
Much will depend on how Canada and Mexico respond to the new tariffs. If trade relations worsen, markets may remain unstable. However, if negotiations lead to a resolution, it could restore confidence and reduce some of the selling pressure on Bitcoin and other risk assets.
Conclusion
Bitcoin’s drop below $90,000 has shaken the market, but it is not the first time the cryptocurrency has experienced heavy volatility.
The combination of economic uncertainty, institutional outflows, and profit-taking has created a challenging environment, but Bitcoin’s long-term fundamentals remain unchanged.
Market participants will be closely watching for signals from the Federal Reserve, developments in global trade, and broader investor sentiment. Whether Bitcoin bounces back or continues to struggle will depend on how these factors evolve in the coming weeks.