After reaching record highs last year, bitcoin appears to be coming back down to earth. The price of bitcoin, the original and most popular cryptocurrency, dropped below $88,000 or more than 7% Tuesday, its lowest level since November, as tariff fears and economic worries dragged down the NASDAQ and cryptocurrencies.
Trump has said tariffs on Canada and Mexico are set to move forward next week.
Bitcoin had rallied above $100,000 after Donald Trump was elected president on the belief that his administration would usher in crypto-friendly regulation. On the campaign trail, Trump embraced cryptocurrencies and pledged to make the U.S. the crypto capital of the world.
The selloff in bitcoin and other cryptocurrencies, including ethereum and solana, gained steam Tuesday after a report showed a larger than expected drop in consumer confidence this month.
Paul Schatz, president of Heritage Capital, tells ABC News, “The ‘risk-on’ theme is now fully ‘risk-off’ as evidenced by bonds finally rallying as a safe haven along with consumer staples and utilities.”
“Crypto has held up remarkably well,” he added. “I think too many people ran to it as a ‘safety’ play and are now being punished.”
Since Trump’s inauguration, bitcoin is down about 20%, as some of its initial luster following the presidential election begins to fade.
Eric Trump, the president’s son, posted on X (formerly Twitter) Tuesday: “Buy the dips!!!” – replacing the letter “B” with the symbol for bitcoin.
In this July 27, 2024, file photo, former President Donald Trump speaks at the Bitcoin 2024 conference in Nashville, Tenn.
Brett Carlsen/Bloomberg via Getty Images, FILE
Since naming some crypto-friendly officials to his administration, including Paul Atkins, Trump’s pick to head the Securities and Exchange Commission, analysts say investors are waiting for the next big crypto catalyst to trade on.
There are signs that Congress may be ready to usher in digital asset legislation. Two Republican members of the House Financial Services Committee, Reps. French Hill, R-Ark. and Bryan Steil, R-Wis, recently wrote in an op-ed, “Washington has been asleep at the wheel for far too long” when it comes to passing legislation for digital assets such as cryptocurrencies.
“Effective legislation and proactive regulatory engagement will ensure good actors with innovative products can thrive in the U.S. and consumers are appropriately protected from rug pulls, market manipulation and other fraudulent activity,” the op-ed said.
Some crypto investors were rattled by the recent record-breaking theft of $1.5 billion worth of digital currency from the Dubai-based cryptocurrency exchange Bybit. Security researchers believe North Korea, which authorities have blamed for several other major crypto hacks, was behind the Bybit theft.
Ben Zhou, the platform’s co-founder and CEO, wrote in a press release Monday that “Bybit fully backs all customer assets entrusted to our platform, maintaining a dynamic ratio of over 1:1. We are fortunate to have all-weather friends in a cut-throat industry—our peers and even competitors stood with us during challenging times, and our customers deserve the same level of commitment.”
A crypto scandal involving the president of Argentina is adding to investors’ worries about the vulnerabilities of this still nascent industry. Argentine President Javier Milei is facing a corruption probe into his promotion of the meme coin LIBRA, whose price skyrocketed and then quickly crashed after he posted about it on X. Milei has since distanced himself from the meme coin and has denied any wrongdoing.
New data shows money flowing out of bitcoin-backed exchange-traded funds or ETFs. Data from LSEG shows a net monthly outflow of about $644 million, the largest since the spot bitcoin ETFs first launched in January of 2024.
Crypto analyst Michaël van de Poppe believes bitcoin has further to drop before rebounding, writing on X, “Ultimate bottom case? $83-87k. Then we should be rotating upwards.”
Schatz is forecasting a 25% – 50% decline in the price of bitcoin this year but says there is a place for cryptocurrency in the average investors’ portfolio.
“The percentage allocation is somewhere in the single digits depending on risk tolerance,” Schatz said. “I would not rush in. There are too many latecomers who need to be punished. [Bitcoin] sub $80,000 looks like an interesting spot to commit money. I tell people to traffic in the big names and leave the garbage and memes to gamblers and spectators.”
