In 2025, the Trump administration presented a series of "gifts" to the cryptocurrency industry.
The U.S. Securities and Exchange Commission (SEC) has suspended enforcement actions and investigations against major cryptocurrency exchanges and companies (such as Coinbase, Gemini, Uniswap, OpenSea, ConsenSys, etc.). The White House has issued an executive order aimed at enhancing the U.S. leadership position in the digital asset industry and has expressed an interest in establishing a BTC reserve.
However, these measures are not enough to stop the recent decline in BTC prices and the overall negative sentiment in the crypto industry. As of the time of writing, the current BTC price is $84,000, down 18% since Donald Trump took office, down nearly 23% from the all-time high, and the total cryptocurrency market capitalization has fallen 21%.
Kavita Gupta, founder and general partner of Delta Blockchain Fund, said: "It feels like all the good news in the cryptocurrency field has happened, and the industry's positive progress seems to be just a passing fancy of high-level politicians, lacking proper procedures and due diligence... The situation may change at any time, and the sustainability is doubtful."
Currently, the three main forces driving the market decline may cause it to fall further before it can regain its footing and start to rebound. In fact, the crypto industry may have to wait until 2026 to see a sustained bull market again.
Internal "Backlash"
There are many reasons to explain the recent decline, first of which is the behavior of cryptocurrency participants themselves.
For example, the industry has been in a disadvantageous position due to multiple MEME coin scandals, such as $MELANIA and the later $LIBRA, the latter of which even dragged Argentine President Javier Milei into a scandal. Now, the issuance and trading activities of MEME coins across the entire industry are declining, raising doubts about their long-term sustainability. For example, the daily issuance of new tokens reached a local peak of 66,471 on January 24, just six days after the launch of $TRUMP. On February 27, the latest complete data day, this number had dropped to 27,741, a 58% decrease.
Brian Rudick, head of research at GSR, said of these data: "People used to think that MEME coins were the fairest and most effective form of speculation in the cryptocurrency field, but $LIBRA has shown that this is not the case. Now you see a sharp decline in on-chain trading volume, [although] MEME coins are the first to be hit, but this is dragging down the entire cryptocurrency field."
In addition, the $150 million hacking of Bybit by North Korean hackers (the largest cryptocurrency theft in history) has once again raised questions about the safety of investing funds in cryptocurrencies. Gupta pointed out: "These hacking incidents make the outside world feel that even after 10 years of development, this industry has not yet truly matured."
External Headwinds
All these negative sentiments within the industry are being amplified by the broader decline in investor risk appetite.
Typically, the inauguration of a new government would boost consumer confidence, and business leaders initially welcomed Trump's election because of his pro-business mindset. However, new data shows that consumer confidence is weakening, which may be due to Trump's threat to impose a 25% tariff on trade partners such as Canada, Mexico and the European Union.
The consumer confidence index reported by the non-profit think tank Conference Board has declined for the third consecutive month in February, reaching the lowest level since August 2021.
The University of Michigan's consumer sentiment survey also shows a significant decline in consumer confidence. The report states: "Consumer sentiment continued its downward trend from earlier this month, down nearly 10% from January." This decline is widespread across age, income and wealth groups.
The report also mentioned: "Expectations for inflation over the next year rose from 3.3% to 4.3%, the highest level since November 2023, and have seen an unusually large increase for two consecutive months. The current reading is far above the 2.3%-3.0% range in the two years prior to the pandemic."
Rudick pointed out: "According to the latest data from the CME Fedwatch tool, the market expects two rate cuts this year. But if these expectations completely disappear due to the tariff issue, the decline in the traditional market may exceed that of cryptocurrencies."
How Low Will BTC Go?
It is difficult to accurately predict how far BTC will fall from the current level.
Steve Sosnick, chief strategist at Interactive Brokers, said that even among commodities, BTC is unique. "You know the supply and demand situation for oil, coffee or cocoa. BTC has no intrinsic demand like that. Its existence is purely for speculative or investment purposes."
However, Sosnick pointed to several technical charts that could provide some insight into the price thresholds investors should focus on.
One of the charts is the 200-day simple moving average of BTC. At the current price, the asset is approaching a test of this important indicator for the first time since it clearly broke through in mid-October last year. If this happens, it means the asset has fallen below $80,000, and Sosnick believes the next threshold will be the "60,000 USD high/70,000 USD low range".
Although investor sentiment is negative, the market has not yet reached a state of full-blown panic, as the S&P 500 Volatility Index (VIX) is still within the normal range of the past 12 months. Sosnick said: "The VIX has not reached an extremely high level, which means we may not have escaped the predicament yet, because when the VIX spikes, the rebound often stops."
For BTC, this means it may still fall further, as investors have not yet reached a state of extreme panic. For example, when the Bank of Japan raised rates and unwound the yen carry trade in August, the VIX spiked; currently the VIX is far below that level.
Waiting for the Wind: 2026?
Given all these negative forces affecting the price of BTC, the cryptocurrency industry may have to wait until 2026 for BTC and the entire industry to regain substantive forward momentum. When asked what types of internal or external factors might play a role in this process, the answer is twofold: a strategic BTC reserve or legislation that once and for all sets the rules for the industry.
Although the crypto community has long hoped to establish a strategic BTC reserve, the White House executive order aims to evaluate something different: a federal reserve, where the government will choose to hold the BTC it has obtained through enforcement actions, rather than a strategic reserve, where the government will purchase new BTC. (However, many states are evaluating their own strategic reserves, although few have made meaningful progress.)
Rudick believes that something like a BTC reserve could be beneficial to the industry, but it is far from a guarantee: "[The reserve] has always seemed very unlikely to me, but I do think BTC could easily go up to $500,000. Even if we don't get it in the form of a strategic BTC reserve, I do think the U.S. is likely to create a sovereign wealth fund and increase its BTC holdings."
But for Rudick, a more sustainable path to growth is the enactment of market structure legislation that would allow regulated companies to legally enter the field, though he believes the industry will have to wait until next year to make meaningful progress: "[The legislation] is likely to happen in 2026. But to me, the reason this is so important is that this is what is needed for institutional-scale entry."
As evidence, he cited the recent statement by Bank of America CEO Brian Moynihan, who said that if the industry's rules become clearer, his bank, which has a reserved attitude towards cryptocurrencies, would consider launching a stablecoin. (At least one source close to the Washington negotiations believes that stablecoin legislation could even be signed as early as 2025.)
But before that, the industry needs to remain stable to cope with these adverse factors. After all, the violent fluctuations in investor sentiment are part of the huge risk of investing in Bit currencies.
Sosnick summed up the current market situation in one sentence: "The market usually climbs the stairs when it rises, and takes the elevator when it falls. Bit has taken the elevator to the top floor this time, and now it's taking the elevator down to the basement. This is a highly volatile asset. If the volatility is in your favor, of course it's great - it's something everyone is happy to accept and enjoy. But when the volatility goes in the opposite direction, it's terrible."
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