What To Know:
- Rising geopolitical strain and a stronger US dollar have pushed investors toward safe havens, accelerating deleveraging across assets and weighing heavily on crypto prices.
- The global market is down nearly 50% from its peak, with Bitcoin falling below $71,000 and Ethereum under $2,100, as extreme fear, tight liquidity, and macro sensitivity amplify downside moves.
- While sentiment remains fragile, on-chain data shows large holders accumulating Bitcoin and Ether, suggesting long-term conviction.
Amid rising geopolitical strain, the US dollar has strengthened and the crypto market seems to have taken a hit.
A Bitunix market analyst said the sell-off reflects a market still deep in a deleveraging phase. According to the analyst, risk pricing across assets is now being driven by safe-haven demand rather than growth expectations. Leverage that built up during last year’s rally has yet to be fully unwound.
Crypto Market Slump: Current Trends and Implications
The broader crypto market has retraced close to 50% from its previous peak. Bitcoin slipped below the $71,000 mark. Ethereum fell under $2,100. The declines extended overnight on Wednesday, when Bitcoin dropped to its lowest level since October 2024. The move followed a wider risk-off wave that swept through equities, bonds, and digital assets at the same time.
Market participants say the recent drawdown signals that excess risk premium has been steadily removed from prices. Liquidity conditions remain tight. Sensitivity to macro uncertainty remains elevated. Under such conditions, even modest shocks can trigger outsized reactions.
Sentiment indicators reflect this stress. The Crypto Fear and Greed Index stands at 12, placing it firmly in extreme fear territory. Historically, such readings coincide with periods of forced selling, margin reductions, and cautious positioning across the market.
Macro pressures are adding to the strain. Tensions in the Middle East have resurfaced as a key risk factor. US-Iran nuclear talks have resumed in Oman with mediation from several countries. At the same time, strong warnings from former President Donald Trump and clear gaps between negotiating positions have limited hopes for a rapid easing of regional risks. These developments have repeatedly disrupted oil prices and safe-haven flows, weighing on global risk appetite.
Pressure has also come from the technology sector. A reassessment of valuations linked to the artificial intelligence industry has triggered declines in major tech stocks. The pullback has unfolded across US and international markets in tandem. The result has been a synchronized sell-off in both stocks and bonds. This has reinforced defensive behavior among large funds and encouraged further rotation away from volatile assets such as cryptocurrencies.
The stronger US dollar has compounded these effects. During the Asian trading session, both gold and silver posted declines. Fawad Razaqzada, a global macro analyst at FOREX, said a firm dollar often acts as a headwind for precious metals. He added that a sustained dollar rebound could continue to pressure gold prices in the near term.
Goldman Sachs has taken a longer-term view. The bank said the primary driver behind higher gold allocations comes from Western capital flows and central bank reserve diversification. Short-term trading activity plays a smaller role. In an environment shaped by currency uncertainty and geopolitical risk, hedging demand remains a dominant theme.
Within this scene traders increasingly view Bitcoin as a barometer of broader risk tolerance. As long as global funds favor defense and deleveraging continues, crypto prices remain closely tied to macro signals. A clearer shift would likely require reduced geopolitical tension or evidence that balance sheet contraction across markets has slowed.
Despite the gloom, some investors are stepping in. Large holders appear to be using the downturn to accumulate. Data from EmberCN shows that a whale or institutional entity previously linked to nearly $99 million in profits through Flashbots added 2,500 cbBTC, worth about $181 million, over the past nine hours.
Since the sharp market drop on February 1, total dip-buying by this entity has reached $500 million. That includes 4,000 cbBTC purchased at an average price of $73,837 and 83,392 ETH acquired at an average price of $2,450. The wallet now holds roughly 173,000 ETH valued at $406 million and 4,000 cbBTC worth $295 million. The position currently carries an unrealized loss of about $94.6 million.
For the broader market, attention remains fixed on Bitcoin’s behavior. Signs of liquidation exhaustion, steadier sentiment, and stabilization in ETF flows would suggest selling pressure is easing. Until then, crypto continues to trade as part of a global risk complex led by geopolitics, dollar strength, and the slow process of deleveraging.
Also Read: Bitcoin Slips After Brief Stability Amid US-Europe Trade Dispute
