Bitcoin once fell below $87,000. What happened in the market?

On February 25, 2025, Bitcoin fell below $87,000, reaching its lowest level since mid-November last year.

What happened in the crypto market? Xiaozou from Golden Finance summarized the reasons for the decline, and the possible reasons are as follows:

1. Many U.S. states have reservations about Bitcoin reserve proposals

The drop came after several U.S. states expressed reservations about proposals to hold bitcoin reserves.

Valentin Fournier, an analyst at BRN, said: "Despite US President Trump's recent support for Bitcoin, three state-level Bitcoin reserve proposals in Montana, North Dakota and Wyoming have not been passed. Policymakers are reserved about state-level Bitcoin reserves to avoid being accused of using taxpayer funds for speculation, highlighting the political risks." Fournier added: "In the future, a national reserve strategy supported by bond issuance or partial sales of US gold reserves may be a more viable path for adoption."

2. Global money supply declines

Some observers believe that Bitcoin’s weakness is consistent with the downward trend in global money supply seen earlier this year .

“There appears to be a lag between global money supply and bitcoin prices,” Andre Dragosch, head of European research at Biwise, noted on the X platform.

3. Macro uncertainty leads to capital outflow from crypto market

The ongoing correction in the cryptocurrency market is consistent with capital outflows from cryptocurrency investment products.

• Digital asset investment products saw outflows for the second consecutive week;

• According to the CoinShares report, outflows totaled $508 million in the week ending February 21.

• This indicates that institutional investors have reduced their investments in digital assets.

• Bitcoin saw the largest outflow of funds, totaling $571 million.

• Year-to-date inflows fell from $7.4 billion two weeks ago to $6.6 billion last week.

James Butterfill, head of research at CoinShares, attributed this to uncertainty over trade tariffs, monetary policy and inflation. “We believe investors are being cautious following the inauguration of the U.S. president and the attendant uncertainty over trade tariffs, inflation and monetary policy,” he said.

4. Cryptocurrency and U.S. stocks fell simultaneously as liquidity dried up

Financial newsletter The Kobeissi Letter commented on concerns about crypto liquidity drying up on the X platform as follows:

The cryptocurrency market has lost $325 billion in value since Friday morning. Today at 5pm EST, the cryptocurrency market lost $100 billion in a single hour without any major news. What happened in the cryptocurrency market?

In the past 24 hours alone, we have seen around $150 billion wiped out of the cryptocurrency market. The sell-off was broad-based, with nearly every crypto asset falling sharply. Even the meme coin market seems to have lost a fair bit of its liquidity.

So, what exactly happened?

It all seems to have started with Solana, which has fallen 22% since Friday. During the memecoin craze, Solana showed extreme relative strength. However, as the memecoin craze faded, Solana also began to weaken. For a while, the Solana sell-off had little to do with Bitcoin.

However, as the S&P 500 began to fall last Friday, Bitcoin also joined the decline. As shown in the figure below, the decline of the S&P 500 was accompanied by an acceleration of Bitcoin selling. Today, Bitcoin is losing its relative strength after falling below the $98,000 support level.

5. Hedge funds may close their positions in Bitcoin ETFs

BitMEX co-founder Arthur Hayes posted on social media that many IBIT holders are hedge funds, who earn higher returns than short-term U.S. Treasuries by going long on ETFs and short on CME futures. If the BTC price falls and the basis (the gap between the ETF price and the futures price) narrows, these funds will sell IBIT and cover CME futures. These funds are currently profitable, and considering that the basis is close to the U.S. Treasury yield, they will close their positions during the U.S. trading hours and realize their profits.

6. Citadel Securities enters the crypto market

Curiously enough, this comes just hours after Citadel made a major shift in its stance on cryptocurrencies .

Today, Bloomberg announced that the $65 billion Citadel Securities is looking to become a liquidity provider for Bitcoin and cryptocurrencies. The market saw this as a “sell the news” event.

7. The Bybit hacker attack hit market sentiment

In addition, the Bybit hack on February 21 also seemed to dampen market sentiment . Arkham Intelligence called the attack the "largest financial theft in history" after the $1 billion theft from the Central Bank of Iraq in March 2003.

In fact, the amount of funds stolen in the Bybit hack was more than twice the amount in the second-largest cryptocurrency hack in history, which was the $611 million theft from PolyNetwork in August 2021.

Ethereum’s weakness has also put more pressure on the entire cryptocurrency market. The hacking attack has weakened market confidence.

The technical picture also appears to be losing steam.

However, this does not mean that the cryptocurrency market will enter a long-term bear market. We have witnessed numerous 10% corrections in Bitcoin during this bull market. Technical corrections are benign and healthy.

8. SBF returns to X platform

Most importantly, Sam Bankman-Fried returns to the X platform.

Amid the crypto crash, SBF returns and says he has “deep sympathy for government employees.” Meanwhile, DOGE and Elon Musk are preparing for more massive layoffs in the federal government.

Finally, risk assets like Bitcoin are correcting as volatility returns to the stock market.

We see historical levels of risk appetite in 2024 and continuing into 2025.

A pullback in risk appetite means less liquidity in the cryptocurrency market.

This has certainly happened before.

We all know that the cryptocurrency market needs liquidity to thrive. Overall, there is no single specific factor that is driving cryptocurrencies lower right now. Rather, it is a combination of factors that are causing liquidity to drop.

Finally, we end this article with a quote from Andre Dragosch: “The recent bottoming of the money supply means that Bitcoin’s price decline may not last long.”