Will the sluggish performance of the cryptocurrency market continue?

Original Title: Will Crypto's Underperformance Last?

Original Author: Blockhead

Original Compilation: Baihua Blockchain

Due to the uncertainty of U.S. tariffs, following last week's $1.5 billion Ethereum hacking incident on the Bybit trading platform, investor confidence in cryptocurrencies has further eroded, causing Bitcoin to drop below $90,000 and hit its lowest point since November 18 on Tuesday.

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

1. Market Macro Environment

As signs of a weakening U.S. economy emerge, recession fears are returning.

There is increasing evidence that anxiety about the future of the economy among Americans is intensifying due to the uncertainty surrounding President Trump's policies. U.S. consumer confidence plummeted last month, marking the largest decline since August 2021.

Americans are cutting back on spending: according to a recent Wells Fargo survey, more than half of consumers have postponed major life decisions due to concerns about the economic outlook and the consequences of Trump's tariff threats.

One in six has delayed plans for further education, one in eight has postponed retirement plans, and about one-third have delayed home-buying plans.

In response to recession fears, the prices of safe-haven government bonds have surged, with yields falling to their lowest levels in two months.

Compounding these worries, Trump reiterated on Monday, ahead of the deadline, that he would impose a 25% tariff on imports from Canada and Mexico, which had been postponed last month.

Smaller cryptocurrencies have been hit much harder than Bitcoin, which has dropped about 8% over the past week. According to CoinGecko, the values of Dogecoin, Solana, and CardanoToken have decreased by about 20%.

Since the beginning of the year, sentiment in the crypto market has been generally bleak, especially in recent weeks due to the volatility surrounding meme coins and the recent Bybit hacking incident, further exacerbating this pessimistic atmosphere. The recent decline in cryptocurrency prices following the largest hacking incident in history is not surprising.

The current macroeconomic situation is also putting pressure on crypto investments. A greater concern is that a small but troubling trend has emerged among risk assets, which could trigger a larger sell-off in the crypto market. Wall Street is also not optimistic, as the "seven giants" stocks have entered a correction phase.

Tuesday was a tumultuous moment for the U.S. stock market, which has fluctuated at record levels for most of 2025. The seven giants that drove a 54% rise in the U.S. stock market over two years have significantly declined.

On Tuesday, the Bloomberg "Seven Giants" index fell by 3.4%, now down more than 10% from its all-time high set on December 17. During this period, the total market capitalization of these seven companies has shrunk by $1.6 trillion. Tesla is one of the companies with the largest decline, down 37%.

Despite the stock market's decline, we have seen a significant decoupling between cryptocurrencies and U.S. stocks. This year, the correlation between Bitcoin and the Nasdaq has dropped significantly, with overall market sentiment towards cryptocurrencies being negative.

"The crypto market is deeply entrenched in negative sentiment, primarily due to a series of meme coin scandals and exit scams," 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 Coin, and other meme tokens have severely undermined investor confidence, leading to significant price drops for Solana and other altcoins."

Although Solana remains one of the most scalable, low-cost, and fast blockchains, it is now referred to as the "Memecoin chain." Due to various FUD (fear, uncertainty, and doubt), a large amount of capital has flowed from Solana to Ethereum and other networks. However, Solana's core advantages still exist: it is not just a gathering place for meme coins but also supports DeFi, AI applications, real-world assets (RWA), and next-generation financial tools.

Meanwhile, before Tuesday's plunge, Bitcoin prices had been fluctuating in a narrow range below $100,000, leading many traders to believe that the crypto bull market had ended, prompting them to sell Bitcoin.

But is this really accurate?

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

The failure of U.S. cryptocurrency policy changes to meet expectations has exacerbated the shift in market sentiment, and the "decoupling" between cryptocurrencies and traditional stock markets is also intensifying. Leinweber stated, "The break in correlation between cryptocurrencies and the stock market is very unusual, especially given that the current macroeconomic environment still favors risk investments."

As the dollar weakens, the head of MarketVector Indexes expects cryptocurrencies and other risk assets to benefit as they have in the past. He stated, "Given this situation, cryptocurrencies are unlikely to remain in a depressed state for long. Capital flowing into the stock market will eventually return to the digital asset market."

2. Cryptocurrency Bottoming: Have We Hit the Bottom?

Leinweber noted that currently over 93% of the top 100 cryptocurrency tokens are trading below their 90-day moving average. This dire market condition typically occurs before a market bottom, rather than being sustained over the long term.

Market indicators tracking social media activity, volatility, trends, and prices—the Crypto Fear and Greed Index—recently fell to its lowest point in five months at 25, reflecting increasingly pessimistic market sentiment. With the uncertainty surrounding Trump's tariff policies, cryptocurrency prices continue to decline.

Some analysts are beginning to ponder whether it is time to "buy the dip." In the long run, Geoffrey Kendrick, global head of digital asset research at Standard Chartered, stated that Bitcoin could benefit from the decline in U.S. Treasury yields, a change stemming from the market's shift to risk aversion following last Friday's PMI report, with a rebound expected in the medium term.

"But now is not the time to buy the dip; the market may drop to around $80,000," Kendrick added.

Bernstein analysts reiterated their prediction that Bitcoin's year-end price will reach $200,000, as traders closely monitor upcoming U.S. inflation data for potential bullish signals, especially as the data trends towards the Fed's targets.

However, Trump's policies have begun to negatively impact crypto assets and the broader risk market. The uncertainty surrounding tariffs as a negotiation strategy or an actual threat is unsettling many investors.

Michael Hartnett, a strategist at Bank of America, stated that "doubts about the S&P 500's trajectory" are intensifying as market risks continue to rise.

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

In an interview with Bloomberg TV today, Hartnett warned that if stock prices fall another 6%, the government may take action to prevent such a decline.

Meanwhile, Elon Musk's "Government Efficiency Department" continues to actively seek government positions and budget cuts in Washington. Investors are trying to quantify the impact of this cleansing on the Fed's interest rate trajectory, and market pessimism is quite evident.

Bloomberg economist Anna Huang stated that if DOGE can achieve a $100 billion budget cut, it would be enough to lower the consumer price index by 0.2 percentage points. If the cut is larger, reaching $600 billion, it would equate to a reduction of 0.8 percentage points. She believes that if this happens, the Fed will have to cut rates further. "The expected rate cuts in 2026 underestimate Elon," Anna said.

Following Trump's latest tough talk on tariffs and Beijing, concerns about stricter chip restrictions on China have led to a sharp decline in semiconductor stock prices. Intel and Nvidia's stock prices fell by 1.5%, while ASML and ASMI in the Netherlands dropped by 2%. Tokyo Electron in Japan fell by 4.9%. Stocks related to cryptocurrencies are also declining, as Bitcoin's price fell below $90,000, marking its lowest point since mid-November. This reverses some of the stock market gains following Trump's re-election. Microstrategy's stock fell over 6%, and Coinbase dropped over 5%.

3. Analysis of U.S. Treasury Yields

During Trump's first term, the stock market was the most important indicator for the former real estate mogul turned president. However, as Trump's second term enters its second month, the White House's focus has shifted to a new indicator: the 10-year Treasury yield.

Musk and Treasury Secretary Scott Bentsen mentioned lowering market borrowing costs as a goal, reminiscent of policies during President Bill Clinton's administration.

They need to pay attention to the Treasury market, especially the 10-year Treasury yield, as it directly affects borrowing costs for homebuyers and large U.S. corporations. It remains unclear how the market will respond to Bentsen's proposal for deficit reduction and Musk's criticisms of government bureaucracy. Investors still maintain some expectations for success.

In recent weeks, U.S. Treasuries have outperformed interest rate swaps of the same duration. However, most creditors are still looking for observable, substantive results.

Currently, the trend of risk aversion remains, and overall macroeconomic dynamics are showing some pressure.