Will the cryptocurrency market’s sluggish performance continue?

Uncertainty over U.S. tariffs, exacerbated by a loss of confidence among cryptocurrency investors following last week’s $1.5 billion Ethereum hack on the Bybit exchange, sent Bitcoin tumbling below $90,000 and hitting its lowest point since Nov. 18 on Tuesday.

Bitcoin fell more than 7% to around $87,200, down more than $20,000 from its peak of more than $109,000 on Donald Trump’s Inauguration Day last week.

1. Market macro environment

As the U.S. economy shows signs of weakening, recession concerns have returned.

There is growing evidence that Americans are increasingly anxious about the economic future due to uncertainty about President Trump's policies. U.S. consumer confidence fell sharply last month, the biggest drop since August 2021.

Americans are spending less: More than half of consumers are putting off major life decisions because of concerns about the economic outlook and the consequences of Trump’s tariff threats, according to a new Wells Fargo survey.

One in six people have postponed plans for further education, one in eight have postponed retirement plans, and about a third have postponed plans to buy a house.

Reflecting recession fears, safe-haven Treasury prices surged, sending yields to their lowest in two months.

Adding to those concerns was Trump's reaffirmation, ahead of a Monday deadline, of 25% tariffs on imports from Canada and Mexico, which had been delayed last month.

Smaller cryptocurrencies have been hit much harder than Bitcoin, which is down about 8% over the past week. Dogecoin, Solana and CardanoToken have lost about 20% of their value, according to CoinGecko.

Crypto market sentiment has been generally negative since the beginning of the year, especially in recent weeks, with volatility surrounding meme coins and the recent Bybit hack further exacerbating the pessimistic atmosphere. The recent drop in cryptocurrency prices is not surprising after the largest hack in history.

The current macroeconomic situation also weighs on crypto investments. The bigger worry is that a smaller but rather worrisome trend among risk assets could trigger a bigger sell-off in the crypto market. Wall Street is not optimistic either, with the “Big Seven” stocks already entering correction territory.

Tuesday was a turbulent moment for the U.S. stock market, which has been volatile at record levels for much of 2025. The seven giants that have driven the U.S. stock market up 54% in two years have fallen sharply.

The Bloomberg "Big Seven" index fell 3.4% on Tuesday and is now down more than 10% from its all-time high on Dec. 17. The combined market value of the seven companies has shrunk by $1.6 trillion during that period. Tesla was one of the biggest losers, down 37%.

Despite the stock market decline, we have seen a significant decoupling between cryptocurrencies and U.S. stocks. Bitcoin’s correlation with the Nasdaq has fallen significantly this year, and sentiment towards cryptocurrencies is generally negative at the moment.

"The crypto market is in a state of deep negative sentiment, mainly due to a series of meme coin scandals and scams," said Martin Leinweber, head of digital asset research and strategy at MarketVector Indexes and author of "Mastering Crypto Assets." He added: "High-profile scams like the Libra Coin incident in Argentina, Trump Coin and other meme tokens have severely hit investor confidence, causing Solana and other altcoins to fall sharply in price."

Although Solana remains one of the most scalable, low-cost, and fast blockchains, it is now known as the "Memecoin chain." Due to various FUDs (fear, uncertainty, and doubt), a lot of money has flowed from Solana to Ethereum and other networks. But Solana's core advantages remain: it is not just a gathering place for memecoins, but also hosts DeFi, AI applications, real assets (RWA), and next-generation financial tools.

Meanwhile, Bitcoin prices had been trading in a narrow range below $100,000 before Tuesday’s plunge, which led many traders to sell Bitcoin as they believed the crypto bull run was over.

But is this really accurate?

Source: Total Return Indexes (benchmark is 100), MarketVector Indexes

As changes in U.S. cryptocurrency policy have failed to meet expectations, this has exacerbated the shift in market sentiment and the "decoupling" between cryptocurrencies and traditional stock markets has also intensified. "The breakdown in the correlation between cryptocurrencies and stock markets is very unusual, especially in the current macroeconomic environment that still favors risky investments," Leinweber said.

As the dollar weakens, the head of MarketVector Indexes expects cryptocurrencies and other risk assets to benefit as they have in the past. He said: "Given this situation, it is unlikely that cryptocurrencies will remain depressed for a long time. Capital flowing into the stock market will sooner or later flow back into the digital asset market."

2. Cryptocurrency bottoming out: Has the bottom been reached?

Leinweber said that more than 93% of the top 100 cryptocurrency tokens are currently trading below their 90-day moving average. Such severe market conditions usually occur before the market bottoms out, rather than lasting for a long time.

The Crypto Fear & Greed Index, a market indicator that tracks social media activity, volatility, trends and prices, recently fell to a five-month low of 25, reflecting the growing pessimism in market sentiment. Cryptocurrency prices continue to slide amid uncertainty over Trump’s tariff policy.

Some analysts are beginning to wonder if it is time to "buy the dip." In the long run, Geoffrey Kendrick, global head of digital asset research at Standard Chartered, said Bitcoin could benefit from the decline in U.S. Treasury yields, a change that stems from a shift in market sentiment toward risk aversion after last Friday's PMI report, and a rebound is expected in the medium term.

“But it’s not time to buy the dip yet, the market could fall to around $80,000,” Kendrick added.

Analysts at Bernstein reiterated their forecast that Bitcoin will reach $200,000 by the end of the year, and traders are closely watching upcoming U.S. inflation data for possible bullish signals, especially if the data trends toward the Federal Reserve's target.

However, Trump’s policies have begun to have a negative impact on crypto assets, as well as broader risk markets. The uncertainty over whether tariffs are a negotiating tactic or an actual threat is making many investors uneasy.

Michael Hartnett, a strategist at Bank of America, said there is growing "skepticism about the direction of the S&P 500" as market risks continue to increase.

Even so, Wall Street's benchmark index is just 2.6% away from the all-time high hit last week.

In an interview with Bloomberg TV today, Hartnett warned that if shares fall another 6%, the government may take action to stem the decline.

Meanwhile, Elon Musk’s “Ministry of Government Efficiency” is still actively seeking government job and budget cuts in Washington. Investors are trying to quantify the impact of this purge on the path of the Federal Reserve’s interest rates, and the market’s pessimism is clear.

Bloomberg economist Anna Huang said that if DOGE can achieve a $100 billion budget cut, it would be enough to reduce the consumer price index by 0.2 percentage points. If the cut is larger, reaching $600 billion, then it would be equivalent to a reduction of 0.8 percentage points. She believes that if the above happens, the Federal Reserve will have to cut interest rates further. "Expecting a rate cut in 2026 = underestimating Elon," said Anna.

Semiconductor stocks tumbled on concerns about tighter chip restrictions on China following Trump's latest tough talk on tariffs and Beijing. Shares of Intel and Nvidia fell 1.5% each, while ASML and ASMI of the Netherlands fell 2%. Japan's Tokyo Electron fell 4.9%. Cryptocurrency-related stocks also fell as the price of Bitcoin fell below $90,000, its lowest point since mid-November. This reversed some of the stock market gains after Trump's re-election. Microstrategy shares fell more than 6% and Coinbase fell more than 5%.

3. Analysis of U.S. Treasury yields

During Trump’s first administration, the stock market was the most important indicator for the real estate mogul-turned-president. However, as Trump enters the second month of his second term, the White House’s focus has shifted to a new metric: the 10-year Treasury yield.

Musk and Treasury Secretary Scott Bessant mentioned the goal of lowering borrowing costs in the market, a goal reminiscent of policies under President Bill Clinton.

They need to watch the Treasury market, especially the 10-year Treasury yield, because it directly affects the borrowing costs of homebuyers and large U.S. companies. It is unclear how the market will react to Bessant's proposals to cut the deficit and Musk's criticism of government bureaucracy. Investors still have some expectations about the possibility of success.

In the past few weeks, U.S. Treasuries have outperformed interest rate swaps of similar maturity. However, most creditors are still looking for observable, substantial results.

At present, the trend of risk aversion still exists, and the overall macroeconomic dynamics also show certain pressure.