Where is the bottom of BTC in this cycle?

In 2025, the Trump administration presented a series of "gifts" to the cryptocurrency industry.

The U.S. Securities and Exchange Commission (SEC) has suspended enforcement actions and investigations against major cryptocurrency exchanges and companies such as Coinbase, Gemini, Uniswap, OpenSea, ConsenSys, etc. The White House issued an executive order to promote U.S. leadership in the digital asset industry and expressed its intention to build a Bitcoin reserve.

However, these moves have not been enough to stem the recent decline in Bitcoin prices and overall negative sentiment in the crypto industry. At the time of writing, Bitcoin is currently priced at $84,000, down 18% since Donald Trump’s inauguration and nearly 23% from its all-time high, while the total cryptocurrency market capitalization has fallen 21%.

Kavita Gupta, founder and general partner of Delta Blockchain Fund, said: "It feels like all the good news in the cryptocurrency space has happened, and the positive developments in the industry seem to be just due to the whim of senior politicians, lacking due process and due diligence... The situation may change at any time, and the sustainability is questionable."

The three major forces driving the market down right now are likely to push it even lower before it regains its footing and begins to move back up. In fact, the crypto industry may have to wait until 2026 before it sees sustained bullish momentum again.

Internal backlash

There are many reasons to explain the recent decline, starting with the behavior of cryptocurrency participants themselves.

For example, the industry has been marred by multiple memecoin scandals, such as $MELANIA and, later, $LIBRA, which even dragged Argentinian President Javier Milley into the scandal. Now, memecoin issuance and trading activity are declining across the industry, raising questions about their long-term sustainability. For example, daily issuance of new tokens reached a local peak of 66,471 on January 24, just six days after $TRUMP went live. On February 27, the latest full data day available, that number fell to 27,741, a 58% drop.

Brian Rudick, GSR’s head of research, said of the data: “People used to think that meme coins were the fairest and most efficient form of speculation in crypto, but $LIBRA shows that this is not the case. Now you’re seeing a massive reduction in on-chain volume, [and while] meme coins are bearing the brunt of it, this is dragging down the entire crypto space.”

In addition, the $1.5 billion hack of Bybit by North Korean hackers (the largest theft in cryptocurrency history) has once again raised questions about whether it is safe to put money into cryptocurrencies. Gupta pointed out: "These hacks have made the outside world think that even after 10 years of development, this industry has not really matured."

External headwinds

All of this negative sentiment within the industry is being amplified by a reduction in risk appetite among investors more broadly.

Typically, a new administration boosts consumer confidence, and business leaders initially welcomed Trump's election because of his pro-business mindset. However, new data shows consumer confidence is weakening, likely due to Trump's threats to impose 25% tariffs on trading partners such as China, Canada, Mexico and the European Union.

The Conference Board's consumer confidence index, a nonprofit think tank, fell for the third consecutive month in February, hitting its lowest level since August 2021.

The University of Michigan's consumer sentiment survey also showed a sharp drop in consumer confidence. The report stated: "Consumer sentiment continued its downward trend from earlier in the month, falling nearly 10% from January. This decline was widespread across age, income and wealth groups."

The report also mentioned: "Expectations for inflation over the next year rose to 4.3% from 3.3%, the highest level since November 2023, and has increased abnormally sharply for two consecutive months. The current reading is well above the range of 2.3%-3.0% in the two years before the epidemic."

“According to the latest data from the CME Fedwatch tool, the market is pricing in two rate cuts this year. But if those expectations were to completely evaporate due to tariffs, traditional markets could fall more than cryptocurrencies,” Rudick noted.

How low will Bitcoin go?

It is difficult to predict exactly how far Bitcoin will fall from now.

Steve Sosnick, chief strategist at Interactive Brokers, said that even among commodities, Bitcoin is unique. "You know the supply and demand of crude oil, coffee or cocoa. Bitcoin does not have the same type of intrinsic demand. It exists purely for speculative or investment purposes."

However, Sosnick pointed to several technical charts that could provide some ideas for price thresholds that investors should watch.

One of the charts is Bitcoin’s 200-day simple moving average. At current prices, the asset is approaching its first test of this important indicator since a clear breakout in mid-October last year. If this happens, meaning the asset falls below $80,000, Sosnick believes the next threshold will be the “high $60,000/low $70,000 range.”

Despite the negative investor sentiment, the market has not yet reached full-blown panic mode, according to the S&P 500 Volatility Index (VIX), which remains within its normal range over the past 12 months. "The VIX is not reaching extremely high levels, which means we may not be out of the woods yet, because when the VIX spikes, rallies tend to stall," Sosnick said.

In the case of Bitcoin, this means it could still fall because investors have not yet reached extreme levels of panic. For example, the VIX spiked in August when the Bank of Japan raised interest rates and unwound the yen carry trade; the VIX is now well below that level.

Waiting for the wind to come: 2026?

With all of these negative forces weighing on Bitcoin’s price, it seems likely that the cryptocurrency industry will need to wait until 2026 before Bitcoin and the industry as a whole regain substantial forward momentum. When asked what types of internal or external factors might play a role in this process, the answer was twofold: strategic Bitcoin reserves or legislation that sets the rules for the industry once and for all.

While the cryptocurrency community has long hoped to establish a strategic Bitcoin reserve, the White House’s executive order seeks to evaluate something different: a federal reserve, in which the government would choose to hold Bitcoin it acquires through law enforcement actions, rather than a strategic reserve, in which the government would purchase new Bitcoin. (Many states are evaluating their own strategic reserves, however, though few have made meaningful progress.)

Rudick believes that something like a Bitcoin reserve could be good for the industry, but it’s far from a guarantee: “[The reserve] has always seemed to me like a low probability, but I think Bitcoin could easily go to $500,000. Even if we don’t get it in the form of a strategic Bitcoin reserve, I do think it’s possible that the U.S. could create a sovereign wealth fund and add Bitcoin.”

But for Rudick, a more sustainable path to growth is to enact market structure legislation that would allow regulated firms to legally enter the space, but he believes the industry will have to wait until next year for meaningful progress: “[Legislation] probably won’t happen until 2026. But the reason this is so important in my opinion is that this is what’s needed for institutions to enter at scale.”

As evidence, he points to recent statements by Bank of America CEO Brian Moynihan, who said his crypto-friendly bank would consider launching a stablecoin if the rules for the industry become clearer. (At least one source close to the Washington talks believes stablecoin legislation could even be signed by 2025.)

But until then, the industry needs to remain stable to weather these headwinds. After all, such wild swings in investor sentiment are part of the huge risk of investing in cryptocurrencies.

Sosnick summed up the current market situation in one sentence: "The process of the market rising is usually like climbing stairs, and the process of falling is like taking an elevator. Bitcoin took the elevator to the top floor this time, and now it is taking the elevator down to the basement. It is a very volatile asset. If volatility is in your favor, it is of course good - this is what everyone is happy to accept and enjoy, but when volatility goes in the opposite direction, it is too bad."