Bitcoin’s recent price swings have left investors questioning whether the current downturn is a buying opportunity or a warning sign of further decline.
The market’s volatility has been fueled by a mix of bearish sentiment, macroeconomic pressure, and shifting investor strategies, painting a complex picture for the months ahead.
Market FUD and Investor Sentiment
Social media engagement data suggests that market fear, uncertainty, and doubt (FUD) often precede price recoveries. Historically, spikes in bearish sentiment have been followed by upward price movements, as seen in November and December 2024. However, Bitcoin’s latest decline from $102K to nearly $92K in early February has yet to show a strong rebound, raising concerns about a possible shift in investor behavior.
On-chain metrics like Coin Days Destroyed (CDD) indicate that long-term holders moved significant amounts of Bitcoin between February 3-5, likely selling into the downturn. Meanwhile, Bitcoin dominance has risen, suggesting that altcoins are struggling more than Bitcoin itself. This trend indicates that while the broader crypto market faces challenges, Bitcoin remains the relatively safer play.
Trump’s Tariffs and the Macro Effect
External economic factors have also played a crucial role in Bitcoin’s latest dip. U.S. President Donald Trump’s recent 25% tariffs on steel and aluminum have added to inflationary concerns, reducing risk appetite across financial markets. The crypto market alone lost 12.19% of its total market cap in February, a significant decline fueled by uncertainty around U.S. trade policies and Federal Reserve rate decisions.
Bitcoin has already suffered two sharp corrections in 2025, each wiping out over 10% of its value. Exchange deposits spiked to over 70,000 BTC in a single day after Trump’s tariff announcement, signaling that many traders were de-risking. With investors wary of high-leverage positions and hesitant about fresh capital inflows, Bitcoin’s support between $88K and $90K is being tested.
The situation echoes 2018, when Trump imposed a 10% import tax on Chinese goods, leading to a 72% Bitcoin price collapse by year-end. While such an extreme scenario is unlikely this time, the impact of aggressive trade policies on crypto markets cannot be ignored.
HODLing vs. Short-Term Profit-Taking
A key dynamic in the current market cycle is the divide between long-term holders (HODLers) and short-term traders. Exchange-traded funds (ETFs) and HODLers have helped stabilize Bitcoin’s price, but short-term holders (STHs) have been quick to take profits after each price drop. This has created a choppy price action, preventing a sustained bullish breakout.
More than $8 billion in Bitcoin futures positions were liquidated in just ten days, showing that leveraged traders are pulling back amid uncertainty. If investor confidence in the “Bitcoin-Trump” trade weakens further, Bitcoin’s true bottom may still be ahead.
What’s Next?
The upcoming Consumer Price Index (CPI) report could be a critical factor in determining Bitcoin’s next move. If inflation remains high and rate cuts are delayed, Bitcoin could face further downward pressure. On the other hand, a dovish Federal Reserve stance might provide the relief investors are looking for.
For now, Bitcoin remains caught between macroeconomic headwinds and its historical tendency to recover from FUD-driven sell-offs. Whether this is a temporary pullback or the start of a prolonged downturn depends on how the market reacts to upcoming policy decisions. Traders should watch for key support levels and macroeconomic developments before making their next move.
Editorial Note: This news article has been written with assistance from AI. However, opinions and perspectives are those of Harshajit Sarmah.
