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With the price of Bitcoin ($BTC) falling below $75,000, discussions about a “crypto winter” have resurfaced in the markets.
$BTC, which has been on a downtrend since its peak in October, fell below the $75,000 level on Sunday. Although it has seen a limited recovery today, rising towards $80,000, this level is still approximately 37% below the record high seen in October.
According to analysts, the current decline is due not to a single cause, but to a combination of multiple macroeconomic and market dynamics. The pullback in the cryptocurrency market is linked to weaker-than-expected earnings reports in the technology sector, a sharp decline in precious metals, and uncertainty surrounding the nomination of Kevin Warsh to head the US Federal Reserve.
Jasper de Maere, a desk strategist at crypto market maker Wintermute, commented, “The Bitcoin breakdown stemmed from a combination of three factors that took days for markets to digest: the weakening AI narrative fueled by disappointing earnings from the ‘Fantastic Seven’ companies, a sharp sell-off in precious metals, and the uncertainty surrounding Kevin Warsh’s nomination for Fed chairman.”
On the other hand, uncertainties surrounding crypto regulations are also undermining investor confidence. The stalled Clarity Act, a bill aimed at creating a clear market structure for the crypto market in the US, has led investors to act cautiously. Coinbase CEO Brian Armstrong withdrew his support for the bill in January because it would prohibit stablecoin holders from earning returns. This move has created divisions among prominent figures in the crypto ecosystem and further increased the uncertainty surrounding the bill’s future.
On the macro front, gold and silver experienced sharp fluctuations as investors continued to seek alternatives to the dollar. After reaching record highs last week, the precious metals subsequently fell by 11% and 32% respectively. These sharp movements indicate that the weakening risk appetite is not unique to cryptocurrencies.
The crypto market has experienced severe bear periods before. The crypto winter of 2022–2023 was triggered by the collapses of TerraForm Labs and FTX, with figures like Do Kwon and Sam Bankman-Fried at the center of one of the industry’s biggest crises. However, the current downturn does not involve a scandal of similar scale.
According to De Maere, this time the process can be described as an “organic leverage cleanup” rather than a structural crisis. It is anticipated that a broader and more volatile consolidation period may occur in the crypto market as investors move away from risky assets in an environment of uncertainty.
*This is not investment advice.