TLDR
- Bitcoin dropped 5.6% to $77,494 on Monday amid inflation concerns and recession fears
- President Trump’s tariff policies and recession comments triggered market selloff
- Bitcoin has declined 14.2% over the past week, trading at pre-election levels
- Speculation that Department of Justice may be liquidating seized Bitcoin assets
- Overall crypto market has lost approximately 25% of total market cap since December
Bitcoin prices tumbled to $77,494 on Monday as investors reacted to growing fears of inflation and a possible recession in the United States. The leading cryptocurrency has since recovered slightly to $79,290.
This sharp decline follows President Trump’s weekend comments that raised concerns about economic stability. When asked about a possible recession this year, Trump declined to rule it out.
The president noted there would be a “transition” phase as the economy adjusts to his new tariff policies on China, Canada, and Mexico. These tariffs have created uncertainty in financial markets over recent weeks.
Bitcoin has fallen 14.2% over the past seven days. This brings its price to levels not seen since before the November presidential election.
The price drop coincides with fallout from the White House Crypto Summit. Market participants had high expectations for the event that weren’t fully realized.
The crypto fear and greed index at “extreme fear”
The crypto fear and greed index, which measures market sentiment, has plummeted to a reading of 17. This indicates “extreme fear” among traders and represents the lowest level since mid-2023.
Other cryptocurrencies have followed Bitcoin’s downward trend. Ethereum (ETH) dropped below $2,000 for the first time since November 2023, declining 8.2% in 24 hours.
XRP fell by 4% while Solana (SOL) and Cardano (ADA) experienced even steeper declines of 7% and 8% respectively. This broad market selloff shows investors moving away from riskier assets.
Some industry observers have suggested another factor behind Bitcoin’s price drop. David Bailey, a Bitcoin advocate and BTC Inc. CEO who attended the White House Crypto Summit, proposed a theory on social media.
Bailey claimed the US Department of Justice might be liquidating seized Bitcoin assets. He suggested this activity could explain the recent price movement in the market.
This comes after President Trump issued an executive order to establish a strategic Bitcoin reserve using seized assets. Bailey indicated more information on this situation might emerge soon.
No plans for additional crypto purchases
Investors were disappointed to learn the government won’t make additional crypto purchases. The White House plan will only retain cryptocurrencies seized from illegal activities rather than actively buying more.
This policy didn’t create the buying pressure many had anticipated. Haider Rafique from crypto exchange OKX noted that while establishing a Bitcoin reserve is significant, it doesn’t generate immediate demand.
The broader market downturn follows the Federal Reserve’s December announcement. The Fed indicated fewer interest rate cuts in 2025 than previously expected.
Since that announcement, the overall crypto market has lost approximately 25% of its total market capitalization. The initial optimism following Trump’s election has faded as economic factors weigh on markets.
Traders are now in a wait-and-see mode. They’re closely watching macroeconomic data and government decisions for signals on how to position themselves in the coming months.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
