Why Did Crypto Drop Today?
During the past two days of February 2025, the cryptocurrency market suffered substantial losses that caused Bitcoin prices to fall beneath $100,000. The market downturn stems from multiple important factors which contributed to the decline.
1. Introduction of New U.S. Tariffs
As President of the United States Donald Trump declared new trade restrictions on February 1, 2025 he imposed 25% tariffs aimed at Mexican and Canadian imports alongside 10% duties for Chinese products. A global trade war concern has emerged from these measures which caused investors to shift their investments away from risky assets including cryptocurrencies.
2. Investors near the world trade disputes showed heightened concerns
Following the tariff announcements multiple affected countries started taking immediate retaliatory measures which worsened trade tensions. The current state of market uncertainty has forced investors to decrease their investments in assets that show high volatility including cryptocurrencies.
3. Correlation with Traditional Financial Markets
Cryptocurrencies react more strongly to international economic developments. The crypto market shows signs of market decline because policy choices and geopolitical strain affect major cryptocurrencies including Bitcoin Ethereum Solana and Dogecoin.
4. Profit-Taking by Investors
The strong market expansion phase has convinced certain investors to cash out their profits which generates additional cryptocurrency market pressure resulting in price drops.
5. Impact of Emerging Technologies
New technologies from Chinese AI startup DeepSeek entered the market to challenge established sectors which are closely connected to digital assets.
Outlook
The market downturn has created hesitations but analysts forecast promising long-term development of cryptocurrencies. The market shows potential for growth because institutions are showing greater interest while regulatory developments may take a positive turn. The market shows volatile behavior due to macroeconomic factors. Potential investors should exercise caution while monitoring world economic trends because the cryptocurrency market shows signs of continuing price fluctuations.
On January 8, 2025, the cryptocurrency market saw a significant swoon, with Bitcoin (BTC) falling 5.5% to $95,216 and Ethereum (ETH) losing 7.7% to $3,353. Several factors contributed to this decline:
U.S. Labor Market Data Positive
U.S. labor market figures have come in stronger than expected, lowering the odds the Federal Reserve will cut interest rates soon. Risk on assets like cryptocurrencies usually benefit from a lower interest rate, as it implies additional available investment capital and therefore less attractive bond yields. Investors are reevaluating their crypto market positions when anticipating more sustainable higher rates. Source: Investopedia

A Study of Federal Reserve’s Monetary Policy
I could not agree more, market sentiment has been influenced by the Federal Reserve’s recent decisions. The Fed cut its benchmark rate by a quarter point at its last three policy meetings—the first such reductions since 2015—but cautioned that its pace will probably slow as inflation pressures persist. Cryptocurrencies have received a cautious approach which tempered investor enthusiasm.
Temporarily Selling Off After Reaching New Highs
Bitcoin hit a near three week high over to the tune of $103,000 after exceeding the $100,000 mark for the first time in about three weeks. It was this milestone plus some investor profit taking that lead to downward pressure on prices.
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Broader Economic Concerns
Investors have been more cautious in their approach, due to persistent inflation pressures and concerns of a possible resurgence of inflation in kind to that of the 1970’s. The recent fall in the price of cryptocurrencies is also due to these macroeconomic factors.
Cryptocurrencies and other related stocks will be affected
The downturn wasn’t limited to Bitcoin or Ethereum. Solana (SOL) and other cryptocurrencies also fell more than 7% in 24 hours. The companies were also hit with crypto related stocks, as companies like MicroStrategy, Coinbase Global, and Marathon Holdings slipped 10%, 8% and 7%, respectively.
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Investor Activity
However, while the market fell, Bitcoin and Ethereum exchange-traded funds (ETFs) saw huge inflows, demonstrating that investor interest wasn’t going away. Bitcoin ETF inflows neared $1 billion and Ether ETFs had inflows of $128.7 million, according to Farside Investors, some of whom view the dip as an opportunity to buy.
Co founder Michael Saylor has been busy acquiring Bitcoin for MicroStrategy, making it the biggest corporate owner of the cryptocurrency. The company currently has roughly 447,470 BTC as of January 6, 2025, purchased at an average price of $62,503 per Bitcoin, or about $27.97 billion. Source: Inside Bitcoins
In recent months, MicroStrategy has made several substantial purchases:
December 2–8, 2024: It acquired 21,550 BTC for $2.1 billion, or $98,783 per Bitcoin.
November 25, 2024: The company purchased 55,500 BTC for $5.4 billion, the company’s largest single acquisition to date.
November 18, 2024: Purchased 51,780 BTC for $4.6 billion.
MicroStrategy has funded these acquisitions primarily through the issuance of shares and convertible bonds, in support of its Bitcoin investment strategy.
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The Crypto Market’s Expected Reaction to the U.S. Presidential Inauguration
The cryptocurrency market will be influenced by the upcoming inauguration of President elect Donald Trump on January 20, 2025. By historical standards, markets, be it cryptocurrencies or otherwise, have tended to perform exceptionally well post U.S. presidential elections, as investors bet on a wave of new policies. Still, post inauguration, this momentum tends to decelerate. According to analysts, crypto market could experience a ‘sell the news’ event, as investors take profits from gains made ahead of the pre-inauguration period and in the short term cause price corrections.
Further Declines Expected in the Cryptocurrency Market
Although the cryptocurrency market is definitely growing, it’s still quite volatile. Factors contributing to potential downturns include:
- Regulatory Developments: Market instability can be introduced by future regulations in which there are uncertainties. On the incoming administration side, it has offered support for cryptocurrencies, but the precise regulatory policies will compose the market dynamics.
- Market Sentiment: Price corrections can be precipitated by investor behavior (namely, profit taking after very large gains). The new administration may lead to anticipation of policy changes thus there is increased market activity and then volatility.
- Macroeconomic Factors: Cryptocurrency valuations are still being affected by broader economic measures including inflation rates and monetary policies. For instance, positive labor market data can shape investor expectations on interest rates and in so doing impact crypto asset prices.
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Ultimately, as the volatility of the cryptocurrency market is ever present, there is promise with the prospects of this digital currency. And investors should keep their wits about them, checking regulatory news and looking at overall economic trends which could unsettle the markets.
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Author

James Roy. An expert in trading and cryptocurrency at our company, leveraging his extensive experience to develop a deep understanding of market dynamics and trends. Also a prolific author, using his expertise to create insightful content for our company blog, where he shares valuable knowledge with the community and contributes to the ongoing conversation in this rapidly evolving industry.