Key Points
- Bitcoin’s price fell below $90,000, deepening a selloff across global financial markets.
- The drop is fueling concerns that leveraged investors could trigger a wider spiral of selling pressure.
- The decline is linked to worries about the pace of U.S. interest rate cuts and a broader shift away from risky assets.
- Analysts are concerned about a potential feedback loop where losses in crypto force investors to sell other assets.
Bitcoin’s slide below the $90,000 mark has deepened a slump across global financial markets, raising concerns that highly leveraged investors could trigger a downward spiral of selling.
The world’s largest cryptocurrency fell as much as 2.8% on Tuesday before recovering slightly. The drop in crypto was matched by declines in other markets, with stock indexes in Europe and Asia falling more than 1%, and U.S. equity futures pointing to another day of losses.
Some analysts believe the recent declines across asset classes are partly due to a spill-over from the crypto market. There are also concerns that the crypto selloff could force retail investors to sell other assets to meet margin calls, creating a dangerous feedback loop in which falling prices in one market prompt more selling in others.
“We could see further downside risk for crypto as portfolio adjustments are made either by choice or to cover losses in equities,” said Nick Twidale, chief market analyst at AT Global Markets.
Bitcoin’s decline comes as investors are growing anxious about the pace of U.S. interest rate cuts and are turning their attention to major earnings reports, including from Nvidia. However, Bitcoin’s drop below the key $90,000 level was enough to turn a broad selloff into a more serious rout.
“Bitcoin’s extended selloff has definitely amplified the market’s risk alarm, reinforcing the sense that something deeper may be shifting under the surface,” said Hebe Chen, an analyst at Vantage Markets.
While some see the potential for a rebound once the current selling pressure eases, the mood remains fearful. Cryptocurrencies and stocks had both boomed this year as investors bet on innovation to drive a market rally. Those hopes now seem to be fading.
“Momentum is a self-feeding machine,” said Anna Wu, a strategist at Van Eck. “If we use Bitcoin as a market sentiment gauge — it’s pointing to bear-market level fear.”
