Posted February 28, 2025 at 6:27 pm EST.
The Trump Administration has offered several advantages to the crypto sector in 2025.
The Securities and Exchange Commission (SEC) paused enforcement actions and probes into prominent crypto exchanges and firms like Coinbase, Gemini, Uniswap, OpenSea, ConsenSys, among others. Additionally, the White House released an Executive Order aimed at fostering American dominance in the digital asset sector and hinted at the possibility of creating a bitcoin reserve.
Nonetheless, these measures have not been sufficient to counteract the recent drop in Bitcoin’s price and the overall negative mood in the crypto market. Currently valued at $84,000, Bitcoin has decreased by 18% since Donald Trump took office, nearly 23% from its peak, with the wider cryptocurrency market down 21%.
Kavita Gupta, founder and general partner at Delta Blockchain Fund, commented, “It seems like all positive developments in crypto are happening because influential political figures are saying, ‘Let’s just proceed.’ There’s no due process, no thorough investigation… and this movement can shift at any moment. It doesn’t seem like there’s sustainability.”
Three primary factors driving the market down could lead it to fall further before it finds stability and begins to recover. In fact, the industry might need to wait until 2026 to see any consistent bullish momentum.
Crypto’s Self-Inflicted Injuries
There are plenty of reasons to explain the current downturn, with the behaviors of crypto participants at the forefront.
For example, the industry itself has not helped matters with a series of memecoin controversies like $MELANIA and $LIBRA, which embroiled Argentine President Javier Milei in scandal. Trading activity and new memecoin launches are declining across the board, raising doubts about the long-term sustainability of this trend. For instance, the number of new token launches peaked at 66,471 on January 24, just six days after $TRUMP debuted. By February 27, the last day for which full data was available, this number had plummeted to 27,741, a drop of 58%.
Brian Rudick, head of research at GSR, remarked on these incidents, “People viewed memecoins as the most equitable and effective form of speculation in crypto, but $LIBRA showed that this notion was flawed. Now, on-chain volumes are significantly lower, and while memecoins bear the brunt, it’s impacting the entire crypto landscape.”
Another significant blow to the industry was North Korea’s $1.5 billion hack of Bybit, marking the largest theft in crypto history, which raised further questions about the security of funds in the crypto space. “These hacks lead outsiders to think that this industry, even after a decade, hasn’t matured enough,” Gupta noted.
External Challenges
The prevailing negative sentiment in the industry has been exacerbated by a decrease in investors’ risk appetites.
Normally, consumer optimism rises with a new administration, and business leaders initially welcomed Trump’s election due to his pro-business stance. However, several recent indicators suggest that consumer confidence is deteriorating, likely impacted by President Trump’s threat of 25% tariffs on trading partners such as China, Canada, Mexico, and the European Union.
The February report from the nonprofit Conference Board’s Consumer Confidence Index showed a decline for the third consecutive month, reporting its lowest levels since August 2021.
These findings align with a University of Michigan consumer sentiment survey that revealed a significant drop in consumer confidence. According to the report, “Consumer sentiment continued its early month decline, falling nearly 10% since January. The decrease was consistent across age, income, and wealth demographics.”
Additionally, “Year-ahead inflation expectations rose from 3.3% last month to 4.3% this month, the highest level since November 2023, representing two consecutive months of unusually large increases. The current measure is significantly greater than the 2.3-3.0% range seen in the two years prior to the pandemic.”
These inflation expectations, which have surfaced across various age and income categories, are particularly critical to monitor, as inflation perceptions can become self-fulfilling. Rudick noted, “The last I checked, the CME Fedwatch tool anticipated two rate cuts this year. If those projections are fully retracted due to tariff anxieties, we may see more downsides in traditional markets than in crypto.”
How Low Can BTC Go?
Determining where bitcoin might go from here is challenging. Steve Sosnick, chief strategist at Interactive Brokers, emphasized that bitcoin is unique among commodities. “Unlike crude oil, coffee, or cocoa, the supply and demand dynamics for bitcoin are not as clear-cut. It exists mainly for speculation and investment purposes.”
However, Sosnick referenced a few technical indicators that could shed light on price levels investors should monitor. One involves bitcoin’s 200-day Simple Moving Average. At its current price, the asset is nearing this critical benchmark for the first time since a substantial break in mid-October. If it falls below $80,000, Sosnick believes the next threshold would lie in the “high $60,000s/low $70,000s range.”
While this does not guarantee that bitcoin could drop to that level, Sosnick observed that despite the pessimistic sentiment among investors, total fear has not yet gripped the market, at least according to Wall Street’s primary fear gauge, the S&P 500 Volatility Index (VIX). Although it is on the rise, it remains within a normal range for the past year. “It’s not excessively high, and its current level suggests we’re not necessarily out of danger, as these rallies typically stall when the VIX spikes.”
Regarding bitcoin, this implies that it could still decrease since investors haven’t hit peak fear. For instance, the VIX soared in August following the Bank of Japan’s interest rate hike and the subsequent unwinding of the yen carry trade; it is currently much lower.
Anticipating 2026?
Considering all these adverse elements influencing bitcoin’s price, it seems that the industry may have to wait until 2026 for substantial forward momentum in bitcoin and the wider market. When asked about potential internal or external factors that could facilitate this, responses were twofold: a strategic bitcoin reserve or legislation that solidifies industry regulations.
Although the crypto community hoped for a strategic Bitcoin reserve, the White House’s Executive Order indicated a plan to consider something different: a federal reserve, where the government would retain bitcoin acquired through law enforcement actions—not a strategic reserve to buy additional bitcoin. (Nonetheless, several states are considering their own strategic reserves, although few are making significant advancements.)
Rudick believes that a bitcoin stockpile or reserve could greatly benefit the industry, but it is nonetheless uncertain: “[A reserve] has always seemed unlikely to me, but I do think bitcoin could easily climb to $500,000. Even if it’s not established through a Strategic Bitcoin Reserve, I see potential for the U.S. to create a sovereign wealth fund that includes Bitcoin.”
However, for Rudick, the more sustainable route to growth lies in crafting regulatory framework that legitimizes entry for regulated firms into the crypto space, although he anticipates that meaningful progress won’t occur until next year: “Legislation is likely a 2026 event. This is vital because it’s what institutional investors require to engage significantly.”
He noted recent comments from Bank of America CEO Brian Moynihan, indicating that the bank, which has previously been cautious about crypto, would contemplate launching a stablecoin if clearer regulations were established. (Some sources close to the negotiations in D.C. believe stablecoin legislation could even be enacted in 2025.)
Until then, the industry must remain resilient amidst these challenges. This volatility is part of the inherent risk that comes with investing in crypto.
“There’s an old adage that markets take the stairs up to the attic and take the elevator down to the basement,” remarked Sosnick. “In this case, Bitcoin rode the elevator to the rooftop and is now taking the elevator back down to the basement… It remains a volatile asset. Volatility is beneficial if it moves in your favor—I refer to that as socially acceptable volatility. But volatility is painful when it moves against you.”
