Will the sluggish performance of the cryptocurrency market continue?

Original title:Will Crypto's Underperformance Last?

Original author: Blockhead

Original translation: vernacular blockchain

Due to uncertainty over U.S. tariffs, the loss of confidence in cryptocurrency investors has been exacerbated by the loss of confidence in cryptocurrency investors following the $1.5 billion Ethereum hack on Bybit trading last week, causing Bitcoin to fall below $90,000 and hit its lowest point since November 18 on Tuesday.

Bitcoin fell more than 7% to about $87,200, down more than $20,000 from the peak of more than $109,000 set by Donald Trump’s inauguration day last week.

1. Market macro environment

As the U.S. economy shows signs of weakening, recession worries are back.

There is growing evidence that Americans’ anxiety about the future of the economy is intensifying due to uncertainty in President Trump’s presidential policy. U.S. consumer confidence fell sharply last month, with the largest decline since August 2021.

Americans are reducing spending: More than half of consumers have delayed major life decisions due to concerns about the economic outlook and the consequences of Trump’s tariff threat, according to a new Wells Fargo survey.

One in six postponed plans for continuing education, one in eight postponed retirement plans, and about one in three postponed plans for home purchases.

Reflecting on recession concerns, safe-haven Treasury bond prices rose sharply, yields fell to their lowest point in two months.

Intensifying these concerns is Trump reiterating before Monday's deadline that he would impose a 25% tariff on imported goods from Canada and Mexico, which had been postponed last month.

The smaller cryptocurrencies have suffered far more than Bitcoin, which has fallen by about 8% in the past week. According to CoinGecko, Dogecoin, Solana and CardanoToken have dropped by about 20%.

The crypto market sentiment has been generally depressed since the beginning of the year, especially the fluctuations surrounding meme coins in recent weeks and the recent Bybit hacking incidents, which have further exacerbated this pessimistic atmosphere. The recent decline in cryptocurrency prices is not surprising after the biggest hack in history.

The current macroeconomic situation also puts pressure on crypto investment. The bigger concern is that a small but rather worrying trend in risky assets could trigger a larger sell-off in the crypto market. Wall Street is not optimistic, and the "Big Seven" stocks have entered the adjustment range.

Tuesday was a turbulent moment for the U.S. stock market, which fluctuated at record levels for most of 2025. The seven giants that drove the U.S. stock market to rise 54% in two years have fallen sharply.

On Tuesday, the Bloomberg Big Seven index fell 3.4%, and has now fallen more than 10% from its all-time high on December 17. During this period, the total market value of the seven major companies has shrunk by US$1.6 trillion. Tesla was one of the biggest drops, down 37%.

Despite the decline in stocks, we see a significant decoupling between cryptocurrencies and U.S. stocks. This year, the correlation between Bitcoin and Nasdaq has dropped significantly, and the market's sentiment towards cryptocurrencies is generally negative.

"The crypto market is in deep negative sentiment, mainly due to a series of meme coin scandals and runaway incidents," said Martin Leinweber, head of digital asset research and strategy at MarketVector Indexes and author of Mastering Crypto Assets. He added: "High-profile scams like the Libra Coin incident in Argentina, Trump coins and other meme Tokens have severely hit investor confidence, causing the prices of Solana and other altcoins to drop sharply."

Although Solana is still one of the most scalable, low-cost and fast blockchains, it is now called the “Memecoin chain”. Due to various FUDs (fear, uncertainty and doubt), a large amount of funds have flowed from Solana to Ethereum and other networks. But Solana's core strengths still exist: it is not only a gathering place for meme coins, but also carries DeFi, AI applications, real assets (RWA), and next-generation financial tools.

Meanwhile, before Tuesday’s plunge, Bitcoin prices had been fluctuating in a small range of less than $100,000, causing many traders to believe that the crypto bull market was over and therefore sold Bitcoin.

But is this really accurate?

Source: Total Return Index (benchmark 100), MarketVector Indexes

As changes in U.S. cryptocurrency policy failed to meet expectations, this exacerbated the shift in market sentiment, and the "decoupling" between cryptocurrencies and traditional stock markets is also intensifying. "The breakdown of the correlation between cryptocurrencies and stock markets is very unusual, especially when the current macroeconomic environment remains skewed towards venture capital," LeinWeber said.

As the dollar weakens, the head of MarketVector Indexes expects cryptocurrencies and other risky assets to benefit as they did in the past. "With this situation, it is unlikely that cryptocurrencies will remain in a downturn for a long time. Sooner or later, capital flowing into the stock market will flow back to the digital asset market."

2. Cryptocurrency bottoms out: Has it reached the bottom?

RineWeber said that more than 93% of the top 100 cryptocurrencies are currently trading below their 90-day moving average. This severe market situation usually occurs before the market bottoms out rather than lasting for a long time.

Market indicators that track social media activity, volatility, trends and prices—the Crypto Fear and Greed Index—recently fell to a five-month low of 25, reflecting an increasing pessimism in market sentiment. Cryptocurrency prices continue to decline as Trump’s tariff policy uncertainty.

Some analysts have begun to think about whether it is time to "buy at the bottom". In the long run, Geoffrey Kendrick, global head of digital assets research at Standard Chartered, said Bitcoin could benefit from a decline in Treasury yields, a change that stems from a shift in market sentiment to hedge after last Friday’s PMI report and a possible rebound in the medium term.

"But now is not the time to buy at the bottom, and the market may fall to around $80,000," Kendrick added.

Bernstein analysts reiterated their forecast for Bitcoin’s year-end price to hit $200,000, and traders are closely watching for upcoming U.S. inflation data to look for possible bullish signals, especially as the data trends toward Fed targets.

However, Trump’s policies have begun to negatively impact crypto assets and the broader risk market. The uncertainty of whether tariffs are a negotiation strategy or a real threat is uneasy for many investors.

Michael Hartnett, a strategist at Bank of America, said "doubts about the S&P 500's trend" are growing as market risks continue to rise.

Even so, Wall Street's benchmark index is only 2.6% away from the all-time high it hit last week.

In an interview with Bloomberg TV today, Hartnett warned that if the stock price falls another 6%, the government may take action to stop the decline.

Meanwhile, Elon Musk's "Government Efficiency Department" is still actively seeking government positions and budget cuts in Washington. Investors are trying to quantify the impact of this cleaning on the Fed's interest rate trend, and the market's pessimism is very obvious.

Bloomberg economist Anna Huang said that if DOGE can achieve a $100 billion budget cut, that would be enough to lower the consumer price index by 0.2 percentage points. If the cuts were greater, reaching $600 billion, that would amount to a 0.8 percentage point reduction. She believes that if the above situation occurs, the Fed will have to cut interest rates further. "The rate cut is expected in 2026 = an underestimation of Elon," Anna said.

Concerns about stricter chip restrictions on China have caused semiconductor stock prices to plummet after Trump's latest tough remarks on tariffs and Beijing. Intel and Nvidia share prices fell 1.5%, while Dutch ASML and ASMI fell 2%. Tokyo Electronics, Japan, fell 4.9%. Cryptocurrency-related stocks are also falling as Bitcoin prices fell below $90,000, the lowest since mid-November. This reversed some stock market gains since Trump's re-election. Microstrategy shares fell more than 6%, while Coinbase fell more than 5%.

3. Analysis of U.S. Treasury yields

The stock market was the most important indicator of the transformation from real estate tycoon to president during Trump's first administration. However, as Trump’s second term entered his second month, the White House’s focus has turned to a new indicator: the 10-year Treasury yield.

Musk and Treasury Secretary Scott Becent mentioned the goal of reducing market borrowing costs, which is reminiscent of policies during the presidency of Bill Clinton.

They need to focus on the Treasury market, especially the 10-year Treasury yield, because it directly affects the borrowing costs of home buyers and large U.S. businesses. It is unclear how the market responded to Becente’s proposal to cut the deficit and Musk’s critical response to government bureaucracy. Investors still maintain certain expectations for the possibility of success.

Treasuries have outperformed interest rate swaps for the same maturity over the past few weeks. However, most creditors are still looking for observable, substantial results.

At present, the trend of risk avoidance still exists, and the overall macroeconomic dynamics have also shown certain pressure.