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The past few days have been brutal for crypto markets, with Bitcoin plunging below $85,000 and major altcoins like Ethereum, Solana, and XRP suffering double-digit losses. This downturn wiped out over $1 billion in leveraged positions, erasing over $250 billion market cap, and left traders questioning whether the bull cycle is over—or if this is just another shakeout.
The Perfect Storm: Tariffs, Leverage Unwinding, and the ByBit Hack
While headlines blame Trump’s tariff threats, the reality is more complex. The crypto market was already overleveraged, and institutional hesitation fueled the decline. Adding to the turmoil, North Korea’s Lazarus Group stole $1.5 billion from ByBit over the weekend, the largest crypto hack in history. The stolen assets are being laundered across multiple addresses, triggering panic and liquidity concerns.
The Institutional Freeze, ETF Outflows, and the Liquidation Cascade
Recently, U.S. Bitcoin ETFs have seen outflows surpassing $1 billion, reversing early-year momentum. Institutional players are actively de-risking amid macroeconomic uncertainty and the Federal Reserve’s ambiguous rate policy, forcing risk assets like crypto into correction mode.
Meanwhile, Bitcoin futures open interest had reached unsustainable highs, signaling an overleveraged and vulnerable market ripe for a liquidation cascade. The current sell-off isn’t just a reaction to tariffs or ETF outflows; it’s a predictable deleveraging event.
ByBit Hack Fallout: The Lazarus Effect
As ByBit’s hacked funds move through laundering channels, the industry’s inability to freeze stolen assets has deepened distrust in centralized exchanges.
“It is a ‘wake-up call’ highlighting security as the Achilles’ heel of digital assets,” says Yuriy Sorokin, CEO and co-founder of 3Commas. “The […] attack has deepened market fragility, fueling panic sell-offs and a liquidity crunch.”
“Stronger security framework is the only solution,” continues Sorokin. “Exchanges must blacklist stolen assets, enforce mandatory cold storage, integrate AI-driven threat detection, and require quarterly, independent security audits. The fact that such standards aren’t already in place is a liability.”
Meme Coin Bust & Macro Trends: Is This the Beginning of a Prolonged Downturn?
Solana, which led the recent altcoin rally, plunged over 15% as meme coin speculation cooled. Retail activity has slowed, and scandals linked to illicit projects have dampened confidence in the ecosystem.
On a macro-level, the economic climate significantly impacts crypto’s trajectory. With a stronger U.S. dollar, geopolitical tensions, and tighter monetary policies, crypto is increasingly vulnerable to external shocks. The Fear & Greed Index’s drop indicates market panic, but historically, such sentiment-driven pullbacks present opportunities for long-term investors.
Aleksei Ponomarev, CEO and co-founder at J’JO says, “With the recent downturn, traders question whether this signals a bear market or just a cyclical correction before a rally. Historically, crypto markets cycle and short-term volatility don’t dictate long-term direction.”
“Despite price swings, key catalysts remain intact: crypto ETFs, clearer regulations, and growing institutional adoption. These factors point to an upward trajectory, even amid temporary shakeouts. Traders should focus more on broad-market strategies like indexes to reduce risk and align with market trends.
The Path Forward: Temporary Pain or Structural Shift?
What happens next? There are two possible scenarios:
- Short-Term Shakeout, Long-Term Recovery: This correction could serve as a market reset, flushing out weak hands and paving the way for a more sustainable rally. If macroeconomic conditions stabilize and institutional inflows resume, we could see a strong rebound by Q2 2025.
- Extended Correction, Lower Lows: If ETF outflows continue, macro uncertainty deepens, and liquidity remains constrained, Bitcoin could test the $85,000-$88,000 range before stabilizing. If selling pressure extends into March, altcoins could see even steeper declines.
“The current range of $85,000-$88,000 is considered a liquidity zone, where institutional activity has been observed in the past” noted Omri Hanover, Head of Business Development at Gems Trade. However, if this level fails to hold, further declines remain possible. On the other hand, if the market recovers, a breakout above $90,500-$92,000 indicates a shift in momentum.”
“Indicators suggest that smart money may be accumulating at current price levels, but it is important to note that this does not guarantee a price reversal,” continues Hanover. “A decline in Bitcoin exchange balances could indicate asset transfers to private wallets.”
This bloodbath is a stark reminder of crypto’s volatility, but it does not necessarily indicate market collapse. While short-term traders face heavy losses, seasoned investors recognize these corrections as part of the cycle.
The key takeaway? The crypto market is maturing, bringing both growing pains and opportunities.
The real question remains: Is this a necessary market reset or the start of a prolonged downturn? Only time will tell.
