The recent downturn in the cryptocurrency market has seen Bitcoin plummet to its lowest value since last year’s tariff-induced shock, closely aligning its trajectory with the performance of precious metals. On February 1st, Bitcoin underwent a steep decline, momentarily dipping below $76,000 before experiencing a slight recovery. Currently, it is trading around $78,500 after suffering a 6.6% loss over 24 hours, which has expanded its year-to-date losses to 10%.
In addition to Bitcoin, other major cryptocurrencies such as Ethereum and Solana also reported significant losses. Ethereum saw a sharp decrease of 9.4%, while Solana’s value sank by over 11%. Data from Coinglass highlights a staggering $2.58 billion worth of cryptocurrency positions liquidated across various networks within the last 24 hours, impacting over 430,000 traders. Long positions accounted for the majority of these liquidations, totaling $2.41 billion, contrasted with $160 million in short position liquidations. The largest single liquidation order was on Hyperliquid-ETH, valued at $223 million.
This decline in cryptocurrency values coincided with a sharp retreat in precious metal prices. Gold, which had recently surged past $5,600 per ounce, dropped significantly to $4,800. Silver prices fell even more dramatically, with spot prices plummeting by 26.3% to $85.15 per ounce, marking a decline greater than 30% from the previous day’s peak.
The downturn in both precious metals and cryptocurrencies appears connected to U.S. President Trump’s recent decision to appoint Kevin Warsh as Chairman of the Federal Reserve. This policy shift strengthened the U.S. dollar and alleviated concerns regarding the Federal Reserve’s independence. However, a stronger dollar typically diminishes the appeal of gold, silver, and Bitcoin to investors seeking alternative currencies.
While both cryptocurrencies and precious metals fell this week, the prior rise in gold and silver prices had illustrated investor demand for safe-haven assets amid growing geopolitical tensions. Conversely, Bitcoin’s inability to capitalize on this trend has increased perceptions of it as a risky asset. Ilan Solot, a Senior Global Market Strategist at Marex Solutions, remarked that Bitcoin remains an asset wrestling with valuation models, with no clear consensus regarding the factors influencing its price.
Pramol Dhawan, Managing Director at Pimco, argued that the perception of Bitcoin as “digital gold” is waning, as evidenced by its price drop which suggests it is “not a monetary revolution.” Additionally, a senior figure in the crypto sector indicated that Bitcoin’s association with the current U.S. administration has adversely affected its standing. Previously, Bitcoin reached nearly $125,000 due to investor confidence influenced by the Trump administration’s favorable crypto regulations. However, ongoing tariff threats, controversial remarks regarding Greenland, and geopolitical tensions with countries such as Iran and Venezuela have significantly dampened enthusiasm for cryptocurrencies.
Analysts from crypto research firm Kaiko noted that Bitcoin’s correlation with gold is notably unstable, swinging between strong positive and negative relationships depending on the macroeconomic narrative at play. The recent fluctuations are emblematic of Bitcoin’s ongoing identity crisis within the broader financial landscape.
