Bitcoin Plunges to 3-Month Low, Reversing Post-Trump Election Gains

Bitcoin, the world's most popular cryptocurrency, has plummeted to a three-month low, reversing the gains it made following the election of U.S. President Donald Trump. The digital asset was trading at about $80,500 in early trading in Asia on Friday, down 3.45% on the day and nearly 25% lower than an all-time high hit in mid-December. This reversal has raised concerns among investors about the future of the cryptocurrency market and the potential impact of geopolitical events on its price.



The recent decline in Bitcoin's price can be attributed to several factors, including market uncertainty, regulatory concerns, and geopolitical tensions. The anticipation of potential approval for spot Bitcoin Exchange-Traded Funds (ETFs) in the United States had generated excitement among investors, but regulatory scrutiny and market manipulation concerns have dampened enthusiasm. Additionally, the ongoing Russia-Ukraine conflict and Israel-Gaza war have negatively impacted global markets, including Bitcoin, as investors shun riskier assets during periods of heightened geopolitical uncertainty.

Investors and traders have been hedging against further decreases in Bitcoin's price, with Bitcoin options indicating a notable interest in put options with a strike price of $70,000. This strike price represents the second-highest open interest among all contracts set to expire on February 28, with a total of $4.9 billion in open interest poised to expire by Friday. Since President Donald Trump's inauguration in January, Bitcoin has experienced a substantial decline of roughly 20% from its record highs.

Market analysts attribute this downturn to a combination of factors, including Trump's "aggressive geopolitical" stance and ongoing concerns about elevated inflation. Chris Newhouse, director of research at Cumberland Labs, noted, "Tariff policies are further dampening the outlook, and stubbornly high short-term inflation expectations add to the overall caution." Newhouse also highlighted that the Bybit Ethereum (ETH) hack has not only exerted downward pressure on Bitcoin's price but has also negatively impacted overall market sentiment.



Investors are pulling back amid declining demand for ETFs, with around $2 billion wiped out over the past three days, according to data from Coinglass. Bitcoin perpetual futures—a popular method for offshore investors to leverage their positions—saw a sharp decline in long positions during this timeframe. Adding to the bearish sentiment, demand for Bitcoin exchange-traded funds (ETFs) has waned, with the group experiencing approximately $2.1 billion in outflows over the past six days. This reflects a broader trend of investors pulling back, with more than $1 billion withdrawn from spot Bitcoin ETFs on Tuesday alone, marking the largest outflow since these funds debuted in January of the previous year.

As Bitcoin continues to face challenges, investors should closely monitor macroeconomic indicators, geopolitical developments, and regulatory news to make informed decisions about their Bitcoin holdings. The cryptocurrency market remains volatile, and investors should be prepared for potential price fluctuations and reversals in the near term.