Cryptocurrency crash accelerates — Bitcoin falls below $89,000, triggered by geopolitical tensions and bond sell-offs

The wave of cryptocurrency crashes is spreading across the entire financial market. On Tuesday, Bitcoin rapidly declined from around $89,000, selling off to approximately $88,000, abruptly breaking the upward trend of the past few weeks. This selling pressure is not just a problem in the crypto market but stems from escalating geopolitical tensions, turmoil in the US Treasury market, and sharp fluctuations in the Japanese government bond market.

Background of the Bitcoin Plunge — A Complete Storm of Multiple Factors

The primary trigger for the crypto asset crash is the threat of tariffs by President Trump. Ahead of the Davos World Economic Forum, the White House announced plans to strengthen additional tariffs against Europe. This series of policy uncertainties has significantly dampened investor sentiment and prompted a flight from risk assets.

At the same time, there was a sudden fluctuation in the Japanese government bond market, leading to a massive sell-off of bonds. This international financial market turmoil has heightened traders’ risk-avoidance stance, accelerating the sell-off of risk assets including Bitcoin. According to analysis by CoinDesk’s market team, if Bitcoin falls below $87,586 — the level at the beginning of this year — all gains since the start of the year could be wiped out.

Veteran analyst Peter Brant pointed out that Bitcoin could sharply fall to between $58,000 and $62,000 in the short term. Data from the options market also estimates a 30% chance that Bitcoin will fall below $80,000 by the end of June.

Altcoins also sell off en masse, with Ethereum and Solana falling sharply

The wave of crypto asset crashes has clearly impacted the altcoin market as well. Ethereum is currently trading around $2,950, down about 1.46% in 24 hours. Solana was sold down to $122.80. Large-cap privacy coins like Monero plunged 11.6% in the past 24 hours, and Dash dropped over 8.5%.

The fact that Monero, which had been steadily rising since the beginning of the year, was heavily sold from its all-time high of $713 indicates widespread position adjustments by institutional investors. Zcash is also trading around $354, continuing to face correction pressures following last month’s internal governance disputes.

Institutional investors liquidate positions en masse — crypto-related stocks also decline

In the past 24 hours, approximately $486 million of long positions across the entire crypto market have been liquidated. This is the second-largest liquidation after Monday’s $637 million, marking the worst two consecutive days this month.

Open interest in Bitcoin derivatives increased from $28.5 billion to $29.3 billion during the sell-off phase, suggesting traders are expecting further declines with short positions rather than holding spot assets. Meanwhile, Ethereum’s open interest has decreased significantly, indicating that spot trading is leading the market.

This market turmoil is also affecting crypto-related stocks. Bitcoin holdings giant MicroStrategy (MSTR) fell 7.8% to $161.94. Coinbase declined about 5.5%. Ethereum treasury companies like SharpLink Gaming and Bitmine Immersion Technologies recorded drops of over 7%. Galaxy Digital also declined by 1.87%.

Flight to safe assets — Gold prices rise, signs of outflows from dollar assets

Interestingly, gold prices surged sharply during the same period as the crypto crash. Gold exceeded $4,750 on Tuesday, gaining over 3%. Silver also soared past $95 per ounce, showing an increase of over 7%.

James Harris, CEO of Tessera Group, commented, “The strength of gold continues due to ongoing geopolitical tensions, US fiscal uncertainty, and strong central bank support, reinforcing its role as a defensive hedge.” He also pointed out that “Bitcoin is at a disadvantage compared to gold because liquidity is tightening and risk appetite is subdued.”

The Danish Pension Fund for Teachers announced plans to significantly reduce US Treasury holdings, stating, “US creditworthiness is declining, and there are doubts about long-term fiscal sustainability.” This indicates that investors are beginning to reassess traditional “safe assets” like dollar holdings.

DeFi market remains resilient — Strong demand for stablecoins

Even amid the crypto market downturn, the DeFi sector shows some resilience. The total value locked (TVL) across protocols has maintained an upward trend since October 2023. This suggests that yield-seeking investors are allocating liquidity to stablecoins, maintaining neutral positions while waiting for opportunities.

Expert opinions — Short-term continued selling pressure, but potential buying opportunities in the long run

Mike Novogratz, founder of Galaxy Digital, pointed out that rising gold prices indicate the dollar’s loss of status as a reserve currency. He also said, “Long-term bonds are also being sold off, and Bitcoin continues to face selling pressure. However, to regain an upward trend, it needs to break through the $100,000–$103,000 level, which will take time but will eventually happen.”

Arthur Hayes, co-founder of BitMEX, also noted that the current market turmoil is focused on the chaos in the Japanese government bond market and the potential spillover into US Treasuries. Whether these macroeconomic concerns are temporary or structural will be key to the future development of the crypto crash.

In the stock market, the S&P 500 has fallen about 1.8%, the Nasdaq dropped 2%, and the VIX fear index rose about 5%, indicating widespread selling pressure. However, some AI-related stocks and emerging project tokens (such as Canton Network, AI Rig Complex) are seeing selective buying, suggesting that the market is not entirely bearish and that opportunities may emerge at the bottom.