Bitcoin plunged below $89,000 on Tuesday, reaching levels not seen since mid-November as global risk sentiment deteriorated. The cryptocurrency market faced mounting pressure as technology stocks continued their downward trajectory and Japanese yen strength sparked concerns about broader market stability.
The world's largest cryptocurrency touched $88,500 during early European trading hours. This marked a significant pullback from recent highs. Data from market tracking services confirmed the three-month low amid increasing selling pressure.
The decline coincides with political headwinds in the United States, where several state-level initiatives for Bitcoin reserves failed to gain traction. "Despite U.S. President Donald Trump's recent pro-Bitcoin stance, three state-level proposals for Bitcoin reserves failed in Montana, North Dakota, and Wyoming.
The reluctance to adopt state-run Bitcoin reserves underscores the political risks, as policymakers avoid accusations of speculating with taxpayer funds," said Valentin Fournier, analyst at BRN.
Political considerations appear to be hampering institutional adoption at the state level. "A nationwide reserve strategy—potentially backed by a bond issuance or a partial sale of U.S. gold reserves—could be a more viable path for future adoption," Fournier added.
Some market observers link Bitcoin's weakness to broader monetary conditions. "There appears to be a lag between global money supply and BTC," noted Andre Dragosch, head of research Europe at Bitwise, in a recent social media post. He pointed to the correlation between money supply contractions and subsequent Bitcoin price movements. The analyst offered a silver lining, suggesting that "the money supply has bottomed out recently, meaning BTC's price swoon may not last for long."
Traditional financial markets are showing clear signs of risk aversion. Nasdaq futures dropped 0.3% early Tuesday, indicating an extension of losses. The tech-heavy index has already declined more than 4% since February 18, reflecting deteriorating investor confidence in growth assets.
Currency markets are adding to the nervousness. The Japanese yen strengthened to 149.38 against the U.S. dollar, approaching the three-month high of 148.84 reached on Monday. The currency has gained nearly 6% over the past six weeks as investors increasingly bet on interest rate hikes from the Bank of Japan.
The strengthening yen has evoked uncomfortable memories of last summer's market turmoil. In July, a surge in the Japanese currency following the central bank's rate increase triggered widespread risk aversion. Bitcoin crashed from approximately $65,000 to $50,000 within days during that episode. "Massive Yen strengthening - sometimes occurs with big risk off," warned Joseph Wang, operator of the research portal fedguy.com, last week.
Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or legal advice. Always conduct your own research or consult a professional when dealing with cryptocurrency assets.