Key Takeaways:
- The cryptocurrency sector experienced a sharp decline on Friday, erasing previous gains.
- Bitcoin’s value dropped to $83,800, while the CoinDesk 20 Index fell by 5.7%, with several cryptocurrencies like AVAX and SUI facing hefty losses.
- This downturn coincided with a sell-off in U.S. stock markets due to unfavorable economic indicators, which impacted crypto-related stocks as well.
Hopes for a crypto market recovery diminished as a widespread market crash eliminated most of the week’s gains.
Bitcoin (BTC), which was just under $88,000 a day prior, has since declined to $83,800, representing a 3.8% drop over the last 24 hours. The overall CoinDesk 20 Index also saw a 5.7% decline, with notable native cryptos like Avalanche (AVAX) and Polygon (POL) nearing 10% losses during the same timeframe. Today’s sell-off resulted in a loss of $115 billion in total cryptocurrency market capitalization, as reported by TradingView data.
Ethereum’s ether (ETH) also fell over 6%, hitting its lowest price relative to Bitcoin since May 2020. In addition, Spot ETH exchange-traded funds failed to bring in any net inflows, contrasting sharply with BTC, which attracted over $1 billion in the past two weeks.
This adverse price action among cryptocurrencies occurred concurrently with a drop in U.S. stock indices due to disappointing economic data, with the S&P 500 and tech-heavy Nasdaq down 2% and 2.8%, respectively. Stocks related to cryptocurrencies also faced significant declines, with MicroStrategy (MSTR), the leading corporate Bitcoin holder, down 10%, and Coinbase (COIN) falling by 7.7%.
The recent inflation report revealed a year-over-year price increase of 2.5%, with core inflation rising to 2.8%, slightly surpassing expectations. While consumer spending showed a meager 0.4% increase, inflation-adjusted data indicated limited growth, indicating potential challenges for economic expansion. Additionally, the Federal Reserve of Atlanta’s GDPNow model forecasts a 2.8% contraction in the U.S. economy for Q1, raising concerns about stagflation.
Next week’s implementation of broad U.S. tariffs, termed “Liberation Day” by the Trump administration, will further complicate investor sentiment across the board.
Bitcoin’s correlation with the Nasdaq suggests that another downturn in U.S. equities could further drag down the crypto market. However, there remains a glimmer of hope as today’s drop may be filling the price gap around $84,000-$85,000 that occurred between Monday’s opening and the previous week’s closing on the Chicago Mercantile Exchange. Historically, Bitcoin has often revisited similar CME gaps, indicating this was a likely target, as noted by CoinDesk’s senior analyst, James Van Straten.
“At this stage it’s difficult to determine if we have already seen a bottom in 2025,” said Joel Kruger, market strategist at LMAX Group, in a recent market update. He pointed out that despite the current correction, there are positive trends emerging, such as crypto-friendly policies in the U.S. and the engagement of traditional financial institutions in the crypto space, which could favor digital assets in the future.
“Any additional setbacks that we might see should be exceptionally well supported into the $70-75k area,” he mentioned.
