On Friday, Bitcoin hit its lowest price since the eve of Trump’s re-election in 2024. After hitting an all-time high of $126,000 last fall, Bitcoin has fallen above $60,000 in an ongoing wave of selling. In just eight months, its market value has evaporated by more than $1.2 trillion, and all the gains accumulated by Bitcoin during Trump’s second term have been wiped out.
This is in sharp contrast to the market conditions in the early days of Trump's term: At that time, the market expected that the new government would introduce policies that were favorable to cryptocurrency, which helped push Bitcoin to a record high. Just a month after the presidential election, the price of Bitcoin surpassed the $100,000 mark for the first time.
But market sentiment has reversed. Bitcoin has fallen by nearly 30% this year, and has fallen by more than 6% since Trump took office; on the other hand, the S&P 500 Index has risen by nearly 10% during the year, and has risen by 30% since the beginning of Trump’s second term.
Bitcoin has continued to slump in the eight months since it hit a record high. Some investors have chosen to clear their positions, while others have re-evaluated the value of cryptocurrency in their asset portfolios. Statistics from market data agency Farside Investors show that BlackRock’s flagship Bitcoin ETF experienced net outflows on every trading day from May 15 to June 3.
At the beginning of the conflict between the United States and Iran in late February, Bitcoin briefly rebounded. At that time, analysts discussed whether it could regain its properties as a "digital gold" and a hedge against market uncertainty. However, the gains were quickly retracted.
At the same time, U.S. stocks rebounded strongly after the first round of decline caused by the war, setting new record highs one after another; the price of traditional gold has remained flat this year and has risen by 60% since Trump took office.
Entrepreneur and "Shark Tank" investor Mark Cuban said on the "Front Office Sports" podcast in May: "I think Bitcoin has lost its original value logic." Cuban said he had sold the vast majority of his Bitcoin holdings, adding: "It did not achieve the hedging effect I expected, which is very disappointing."
The flash crash on October 10 last year triggered the forced liquidation of billions of dollars. Since then, Bitcoin has never stabilized; stocks, gold and other assets have comprehensively outperformed Bitcoin during the same period, and the combination of multiple factors continues to suppress currency prices.
The entire crypto industry is in a synchronized downturn: Shares of cryptocurrency exchange Coinbase are down about 30% for the year.
Analysts said that in recent weeks, market funds have become unprecedentedly enthusiastic about the artificial intelligence sector, diverting funds originally invested in cryptocurrencies. The craze brought about by the upcoming listing of giant companies such as SpaceX has gradually replaced the previous market hype about cryptocurrency - Elon Musk's rocket and satellite company is also developing artificial intelligence business.
Jonathan Beale, CEO of Farside Investors, said: "A large number of speculative funds are selling off Bitcoin and chasing artificial intelligence-related assets."
Another negative factor comes from uncertainty about inflation data and the Federal Reserve's interest rate policy. The higher-than-expected inflation data and strong employment report have caused traders and economists to generally adjust their expectations and believe that the Federal Reserve will maintain high interest rates for a longer period of time.
Gerry O'Shea, head of global market insights at Hashdex Asset Management, said that high interest rate expectations and a tighter monetary environment have brought continued pressure to cryptocurrencies.
"Cryptocurrency prices usually perform better in an environment of ample market liquidity and low interest rates. The current market is full of uncertainty about the direction of monetary policy."
Ryan Rasmussen, head of research at Bitwise Asset Management, explained that during the falling market, once traders who use leverage to be long on Bitcoin reach a loss threshold, the exchange will automatically force liquidate their positions, and large-scale liquidation will further amplify the falling market.
Data compiled by Bitwise from CoinGlass shows that within the first five days of this month, the cumulative forced liquidation of long Bitcoin contracts was close to $2.5 billion.
The operations of MicroStrategy (stock code MSTR, referred to as Strategy), a core Bitcoin holding company, also affect market trends: the company continues to purchase large amounts of Bitcoin, and ordinary investors can indirectly allocate Bitcoin assets by buying its shares. Last week, MicroStrategy disclosed that it sold 32 Bitcoins, its first sale since 2022, which directly caused Bitcoin to plummet more than 17% in a single week, setting its worst weekly performance since November 2022.
However, the company changed its operations on Monday and purchased 1,550 Bitcoins, triggering a rebound in the entire crypto market.
Outlook for the future trend of the encryption industry
Although the Bitcoin market continues to be weak, some altcoins have gone out of the independent market: HYPE, a token issued by the Hyperliquid exchange, has increased by 150% during the year, bucking the trend and going up.
The core catalyst that can completely change the landscape of the encryption industry in the short term is the CLARITY Act, which will clarify the regulatory framework for the encryption industry and promote industry compliance and formalization. Currently, both houses of the U.S. Congress are debating this bill.
The Clarity Act will also establish supporting regulatory rules for various digital assets such as stablecoins (cryptocurrencies pegged to the U.S. dollar) and Ethereum.
Hashdex’s O’Shea believes that if the bill passes successfully, it will be a key catalyst to drive up cryptocurrency valuations.
"Many investors who were previously bearish and believed that the encryption industry was heading for the end will immediately change their views and realize that the United States has finally implemented supporting laws, which will attract a large amount of investment funds to the industry."