The cryptocurrency market experienced a significant downturn on February 28, with the total market capitalization plummeting by 6.4% to approximately $2.65 trillion. This decline followed remarks by former U.S. President Donald Trump indicating that tariffs on Canada and Mexico would proceed as scheduled, intensifying trade tensions and prompting a risk-off sentiment among investors.
In a span of 24 hours, the cryptocurrency market saw over $200 billion erased as the tariff disputes exacerbated the correlation between U.S. equities and crypto assets. The market’s pessimism was compounded by Bitcoin’s struggle to overcome resistance at the 50-week simple moving average (SMA), further hindering recovery efforts.
Bitcoin, a leading indicator in the crypto space, took a substantial hit, falling below $80,000 for the first time since November 10. It suffered a 9.5% decline from a February 28 high of $86,988, settling at around $79,400. This drop sparked panic selling among investors, with most cryptocurrencies witnessing significant losses.
Ethereum, for instance, extended its downtrend, reaching as low as $2,000, marking a 10% loss over 24 hours. Other major cryptocurrencies, such as XRP, Solana, and BNB, faced declines of 10%, 9%, and 10%, respectively. Moreover, Dogecoin and Cardano reported the most considerable losses among the top ten assets by market capitalization, each declining by 11%.
The crypto market also saw substantial liquidations, with $879 million in leveraged positions unwound within the past day. Notably, long Bitcoin leveraged positions totaling $380.5 million were liquidated, indicating an overleveraged market skewed towards bullish bets.
This trend mirrored the broader weakness in U.S. equities, where major indices such as the S&P 500, Nasdaq, and Dow Jones reported losses. The S&P 500 dropped by 1.94%, while the Nasdaq and Dow Jones fell by 2.75% and 0.5%, respectively.
The growing correlation between cryptocurrencies and U.S. stocks highlights the shifting perception of Bitcoin from a hedge against uncertainty to an asset influenced by broader market trends. The Kobeissi Letter noted that at peak correlation, Bitcoin moved in tandem with the S&P 500 88% of the time.
The market’s downturn saw the total crypto market capitalization, referred to as TOTAL, fall below the supportive 50-week SMA, now acting as resistance. The weekly relative strength index (RSI) also indicated a shift towards bearish conditions, dropping from 56 to 42.
Despite these challenges, a resurgence in buying pressure could push the crypto market cap back above the 50-week SMA and potentially above $3 trillion, driven by increasing market demand to “buy the dip.”
