Crypto markets have recently hit their lowest point in three months, undoing much of the progress made after Trump’s victory in the U.S. presidential race. Bitcoin managed to stay relatively stable until it broke the $92,000 support level that had been in place since November 2024. Following this breach, the price swiftly dropped to $80,000, where it temporarily stabilized.
Market sentiment has significantly weakened, as indicated by the Crypto Fear and Greed Index, which has plummeted from 55 (Neutral) to as low as 10 (Extreme Fear) over the past month. It currently stands at 34.
The close relationship between crypto assets and traditional markets has led to bitcoin and other cryptocurrencies being influenced by the ongoing uncertainty surrounding tariffs and their potential impact on the U.S. economy in the near term.
An announcement regarding the establishment of a strategic crypto reserve by Trump briefly lifted crypto asset prices, with bitcoin climbing back to approximately $95,000. However, the details on how this reserve would function, what benefits it might bring to taxpayers, and the potential for future crypto purchases remain unclear. This ambiguity has caused bitcoin’s price to retreat, currently hovering around $90,000.
I believe we are at a pivotal moment. Easing financial conditions may allow crypto assets and other risk-related investments to rebound. U.S. Treasury Secretary Scott Bessent recently reiterated the administration’s aim to lower interest rates to assist struggling Americans. However, additional concerns regarding tariffs or failed expectations surrounding the crypto reserve could lead to further declines in bitcoin’s price. It will be interesting to see which narrative prevails in the coming weeks and months.
Generally, during bitcoin bull markets, we observe price retracements of 20-35% before establishing a new base for the next upward movement. The recent drop to $80,000 represents a 28% decline from the all-time high of $109,300, suggesting we may have already seen the lowest point.
Conversely, if prices were to drop further based on the aforementioned concerns, a 35% decline from the peak would place bitcoin at $70,000 before any potential new support level is formed.
I understand the fear that large price fluctuations can evoke in investors, but it’s important to remember that price retracements are a normal part of market behavior. We are still significantly higher compared to this time last year.
For those investors with cash at hand and a long-term confidence in bitcoin, this might present an excellent opportunity to increase their holdings.