Bitcoin’s recent decline has prompted fresh concerns among investors, especially as it has erased nearly all its price gains since the election of former President Donald Trump. The digital asset’s weakness mirrors broader scrutiny over inflated tech valuations and the uncertain trajectory of U.S. Federal Reserve interest rate cuts.
Thomas Probst, a research analyst at the crypto data provider Kaiko, noted that the ongoing contraction in the market suggests it will likely continue for a considerable duration. He emphasized that reduced liquidity is leading to sharper and more volatile price movements.
The slump escalated on January 30 when President Trump appointed Kevin Warsh as the new Federal Reserve chair, sparking fears that this could lead to a tighter monetary policy, further diminishing the demand for Bitcoin. Following that announcement, digital asset prices fluctuated widely, with Bitcoin recording a nearly 20% drop before modestly rebounding the next day.
This volatility in the cryptocurrency market has raised questions about the future of Bitcoin and other digital currencies. The cryptocurrency landscape faced significant turmoil last fall when Trump’s introduction of tariffs on Chinese imports triggered the largest liquidation event in crypto history, contributing to persistent liquidity challenges in the market.
Investment strategist Denny Galindo at Morgan Stanley Wealth Management remarked that the sharp corrections in the market have indicated a potential bubble burst. Although the Trump administration had initially fueled Bitcoin’s growth—propelling it to an all-time high of over $125,000 in October—his pro-crypto policies implemented in 2025 have failed to reverse the recent price descent. As of Thursday, Bitcoin had fallen below $61,000, marking its lowest level since pre-election days.
Despite the bleak outlook, some analysts believe that the worst may be behind Bitcoin. James Butterfill, head of research at CoinShares, pointed out signs suggesting that the market is nearing a bottom, noting a slowdown in selling activity from large holders, often referred to as “whales.” He indicated that some investors view the current dip as an opportunity rather than a reason for alarm.
Liquidity in the market has sharply declined, with Bitcoin’s average 1% market depth—a measure of its capacity to manage trades without substantial price shifts—plummeting from over $8 million in early 2025 to around $5 million currently. This trend raises concerns over market stability, as smaller trades now trigger larger price movements than before.
As market participants prepare for continued volatility, Andrew Moss, head of digital assets research at Jefferies, remarked that current market conditions lack bullish indicators that would imply a forthcoming bottom.
Although cryptocurrencies represent a modest fraction of global market activity, their connections to mainstream finance—including stablecoin reserves and bank exposure—have expanded in recent times. Bitcoin’s correlation to equities has intensified, especially during periods of market stress, making it increasingly vulnerable to overarching macroeconomic and geopolitical changes.
On a brighter note, global equity indexes saw gains as investors returned to U.S. technology stocks following a significant selloff driven by concerns surrounding artificial intelligence expenditures. Bitcoin, benefiting from this positive momentum, managed to rise above the key threshold of $70,000.
The initial rally in Bitcoin after Trump’s 2024 election can be attributed to investor anticipation of reform in digital asset policies. Trump’s administration swiftly responded to industry demands, including implementing regulatory measures at the U.S. Securities and Exchange Commission and enacting legislation governing dollar-pegged crypto tokens. However, clarity on forthcoming crypto-friendly initiatives remains elusive.
While the promise of a national bitcoin stockpile was among Trump’s campaign pledges, the anticipated buying spree of Bitcoin by the U.S. government has yet to materialize, dampening earlier hopes among investors. The reality of this initiative has proven less monumental than expected, leaving many to ponder the future direction of digital assets under evolving regulatory frameworks.
