Bitcoin plunges below $80,000 as crypto market crashes amid tariff fears

The cryptocurrency market descended into chaos early Friday morning as Bitcoin, the world’s leading digital currency, crashed below the $80,000 price tag, settling at $79,000, for the first time since late November 2024.

This steep decline dragged the global cryptocurrency market capitalization down to $2.74 trillion, reflecting an 8.92% drop in just 24 hours. Trading volume also surged to $184.43 billion. The broader crypto ecosystem mirrored this turmoil, with its total market cap falling 8.58% to $2.62 trillion over the same period.

The dip is coming roughly a month after Bitcoin hit a record high of nearly $108,000 in early December, hours before President-elect Donald Trump’s January 20 inauguration. Presently, nearly all the gains from the Trump-inspired bull run have been erased.

By 08:19 AM WAT, over $231 million in crypto positions were liquidated in a single hour, signalling widespread panic among traders. Trading volume for BTC/USD pairs skyrocketed to $71.5 billion in the past 24 hours, triggering $410 million in liquidations of leveraged Bitcoin long positions. This is nearly half of the $865.24 million in total crypto liquidations reported by CoinGlass.

Analysts attribute this market upheaval to macroeconomic uncertainty, with President Trump’s recently enacted tariffs, 25% on imports from Canada and Mexico, and an additional 10% on China, emerging as a primary catalyst. Announced in early February, these measures have fuelled fears of a global trade war, driving a risk-off sentiment that has pummelled speculative assets like cryptocurrencies.

Forbes reported that Bitcoin’s fall has undone its post-election rally, while Cointelegraph directly linked the drop below $80,000 to tariff-induced uncertainty, a sentiment widely echoed on social media platforms like X.

Investor confidence has cratered alongside prices. The Crypto Fear and Greed Index, a barometer of market sentiment, sits at a dismal 16 out of 100, deep in “Extreme Fear” territory. Just a month ago, it stood at 72, reflecting near-extreme greed, underscoring the dramatic shift in market psychology.

Possible reasons for the crypto price crash

The crash’s severity stems partly from overleveraged trading positions. On February 3, X user @crypto_birb reported a single-day capitulation event that erased $240 billion from the crypto market, with total liquidations hitting $1.98 billion.

Today’s plunge appears to be an extension of that volatility, with hourly liquidations of $231 million (reported at 03:24 AM WAT) highlighting the speed of the sell-off. Cointelegraph notes an interesting angle, as prices drop, margin calls force traders to sell, amplifying the downturn. Data from February 3 showed 590,229 traders liquidated in a day, a pattern repeating now as leveraged bets unravel.

The broader market has not been spared. Major altcoins like Ethereum and Solana have followed Bitcoin’s downward trajectory, consistent with their historical correlation. The Coin Republic reported Ethereum at $2,944 on February 4, a level likely breached today as the total market cap, briefly above $3.3 trillion after the earlier crash, faces renewed pressure.

Experts point to factors beyond tariffs amplifying the downturn. The crypto market’s tight correlation with traditional equities has exposed it to a broader sell-off, initially sparked in late January by the surging popularity of the China-based AI app DeepSeek. Rising U.S. Treasury yields and the absence of imminent Federal Reserve rate cuts have squeezed liquidity, leaving speculative investments like Bitcoin vulnerable. Forbes noted on January 13 that a sustained sell-off could push Bitcoin to test support near $74,000-$75,000, a scenario now looming large.

Institutional sentiment, once a stabilising force, is faltering. While X user @neuscaster reported institutional Bitcoin absorption amidst retail apathy on February 22, today’s crash suggests even big players may be retreating. CoinShares recorded $508 million in outflows from U.S. Bitcoin spot ETFs for the week ending February 21, a trend that could accelerate as prices plummet.

The fallout has left traders and analysts divided. BitMEX co-founder, Arthur Hayes, predicted in a January 7 CCN interview that the market would peak in Q1 2025 before correcting in Q2. Today’s drop suggests that the timeline may have accelerated. Some, like @crypto_birb on February 3, see opportunity in the chaos, arguing downturns favour those positioned to “buy the dip.” Others caution that further declines are possible if selling pressure persists.

For now, the market remains in flux. Investors are urged to exercise caution, particularly with leveraged positions, as the risk of additional liquidations looms. Monitoring U.S. economic indicators, like inflation data due this week, and developments on the tariff front will be critical to gauging the crash’s trajectory. Bitcoin’s market dominance pegged at 60%, may cushion it relative to altcoins, but the broader ecosystem faces an uncertain road ahead.

This crash underscores cryptocurrency’s vulnerability to global economic shocks and its reliance on speculative momentum. Once hailed as a hedge against traditional finance, digital assets are proving acutely sensitive to the same forces roiling stocks and bonds. As of 08:19 AM WAT, with Bitcoin below $80,000 and no bottom in sight, a pressing question lingers: Is this a temporary correction or the start of a deeper bear market? Only time and the market’s response to unfolding events will tell.

See also: As Bitcoin price crosses $70,000, here is why experts expect it to crash despite 65% gain in 2024