It’s February and many traders are feeling a chill that feels a lot like crypto winter. Bitcoin dropped below $75,000 on Sunday, the latest in a series of slides that have dragged down the original cryptocurrency since last autumn. While Bitcoin posed a modest rally on Monday, climbing back towards $80,000 by mid-afternoon, that’s still a 37% dip from its record high in October, according to Binance.
Crypto’s downturn is in part spurred by recent macroeconomic factors. One analyst attributes it to soft earnings reports in the tech sector, gold and silver declining, and the nomination of Kevin Warsh as Federal Reserve chair.
“Bitcoin’s breakdown stems from a confluence of three factors that took markets days to digest: disappointing Magnificent 7 earnings that cracked the AI narrative, a violent precious metals unwind, and uncertainty around Kevin Warsh’s Fed Chair nomination,” said Jasper de Maere, a desk strategist at Wintermute.
The stalling of a major crypto bill is also on investors’ minds as they pull back. The Clarity Act was supposed to establish market structure rules for crypto trading but has stumbled in its path to a presidential signature. In January, Coinbase CEO Brian Armstrong pulled his support of the bill because it prohibited customers from earning yield on stablecoins. He then clashed with other prominent voices in the crypto world, putting the future of the bill on even shakier ground.
As investors steer clear of the dollar, precious metals have also seen volatile price swings. Gold and silver reached record highs last week, only to fall by 11% and 32%, respectively.
Cryptocurrencies outside of Bitcoin are also sputtering. Ethereum is down roughly 24% in the last month to its current price of about $2,354 and Solana has declined roughly 20% to its price of about $105, according to Binance.
The crypto world is no stranger to down cycles. The last significant crypto winter took place in 2022 and 2023, when TerraForm Labs and FTX collapsed under the watch of disgraced crypto figures Do Kwon and Sam Bankman-Fried. There is no major scandal that sparked the decline this time around. Instead, investors are shying away from risky assets during uncertain times.
“Crypto’s been in a bear market longer than most appreciate, but this is organic deleveraging rather than structural crisis,” de Maere added.