Event Review: A Market Storm Affecting the Entire Industry

On February 25, 2025, Bitcoin’s price plunged sharply from $94,000 to $87,000, experiencing an 8% drop in just 24 hours, marking the largest single-day drop since February 3. This crash quickly spread across the entire cryptocurrency market: Ethereum fell over 13%, TrumpCoin ($TRUMP) dropped 14%, and smaller market-cap tokens like Dogecoin saw a general decline of 10%-15%. The total liquidation value surpassed $6.5 billion, with more than 360,000 investors facing liquidation.

This crash is not an isolated event. On January 27, Bitcoin had already fallen by 5% due to market risk aversion caused by former U.S. President Trump’s tariff threats and China’s AI model DeepSeek’s technological breakthrough. On February 3, tightening regulations and institutional sell-offs further exacerbated market turmoil, causing Bitcoin’s daily volatility to reach 11%.

Three Core Drivers of the Crash

  1. Policy and Macro-Economic Pressures

    • Fed’s Hawkish Shift: The market’s expectation of interest rate hikes pushed the U.S. Dollar Index higher, pressuring risk assets. The increased correlation between cryptocurrencies and traditional financial markets led to capital flight from high-risk areas.
    • State-Level Legislative Setbacks: South Dakota delayed the HB1202 bill that would have allowed state-level investments in Bitcoin, and Montana vetoed Bitcoin as a reserve asset plan. These policy setbacks weakened institutional confidence.
    • Tighter Global Regulations: Countries like Turkey and India reinforced cryptocurrency trading restrictions, and the European Union added exchanges to the Russia sanctions list, worsening liquidity concerns.

  2. Structural Risks within the Market

    • Frequent Security Incidents: Bybit exchange was hacked with a loss of $1.5 billion, and Infini platform lost $50 million in assets, exposing security vulnerabilities in the industry.
    • Leverage Liquidation Spiral: Contracts with leverage ratios exceeding 50x magnified price volatility, triggering a chain of liquidations, creating a “down → liquidation → accelerated decline” vicious cycle.

  3. Geopolitical and Technological Shocks

    • Trump’s Tariff Threats: The expectation of upgraded tariffs on Chinese tech products led to declines in both U.S. tech stocks and cryptocurrencies.

Market Outlook and Key Indicators to Watch

  • Short-Term Technical and Sentiment Recovery
    Bitcoin has broken below its 200-day EMA (at $88,000), and if it cannot hold this key support, it may test lower levels of $80,000 to $77,000, as previously discussed in past Bitcoin market analysis articles. Conversely, if it can find support around $87,000 and quickly recover above $92,000, the market could return to a consolidation phase.
    Additionally, Standard Chartered points out that market attention should focus on the fund flows of the U.S. Bitcoin spot ETF—two consecutive weeks of $1.8 billion net outflows indicate increased short-term risk aversion, but a fund inflow could alleviate selling pressure.

  • Mid-to-Long-Term Variables and Potential Opportunities

    • Policy Game: The outcome of the 2025 U.S. presidential election will determine the regulatory framework. If Trump’s team’s “pro-crypto” policies come to fruition, it may boost market recovery.
    • Technology Cycle: The supply contraction effect after Bitcoin’s halving in 2024 has not fully manifested, and historical data shows an average 40% increase in the six months following halving.
    • Industry Compliance: Traditional financial institutions like JPMorgan are accelerating custodial services, and Bitcoin mining companies’ carbon-neutral transformation could attract ESG funds.

Market Risk Control Strategies

  1. Short-Term Strategy Adjustments
    Avoid high-leverage contract trading and prioritize spot or low-leverage (not exceeding 5x) trades. For example, you can track Bitcoin’s price fluctuations in real-time via JuCoin.
    You may also begin to build a position around $87,000, focusing on on-chain data (such as exchange net outflow volumes).

  2. Long-Term Investment Directions
    Pay attention to assets with a clear compliance process, such as Bitcoin spot ETFs and regulated exchange platform tokens. JuCoin’s Launchpad regularly launches new projects after rigorous review, which can be used as a reference. Beware of liquidity risks in small- and mid-cap tokens and prioritize top 20 cryptocurrencies by market cap.

  3. Risk Monitoring Checklist

    • Monitor the changes in the U.S. SEC chair and progress on state-level bills.
    • Watch for the impact of Federal Reserve interest rate decisions and geopolitical conflicts (such as the Middle East situation) on risk sentiment.

Market Insights: Understanding the Essence of Crypto Assets from the Volatility

This crash once again confirms the high volatility nature of the cryptocurrency market. While Bitcoin is often compared to “digital gold,” its price remains driven by multiple factors, including macroeconomic conditions, regulatory policies, and market sentiment. For ordinary investors, establishing risk awareness, diversifying portfolios, and paying attention to underlying technological progress (such as Layer2 scaling solutions) are more important than engaging in short-term price speculation.

As Matrixport noted in its February 25 analysis: “The short-term pain of the market won’t change the long-term value of blockchain technology, but participants must learn to identify true opportunities and traps amid the volatility.”

Neason Oliver

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