Cryptocurrency decline accelerates: Bitcoin plunges below $89,000 amid tariff tensions and bond crisis

Bitcoin dropped to $88,16K on Tuesday, recording a 0.90% decline over 24 hours, while the entire cryptocurrency sector is experiencing a widespread collapse. This decline occurs amid increased market nervousness, fueled by US President Donald Trump’s tariff threats against Europe and major turmoil in the Japanese bond market. The cryptocurrency fear and greed index has plummeted to 31, reflecting growing trader concern over geopolitical uncertainty.

The Crypto Market Collapse Today: Scope and Magnitude

The decline in cryptocurrencies has been more severe than expected. Bitcoin, which briefly reached $96,000 earlier this month, has fallen below the psychological $90,000 mark, erasing all gains accumulated since the start of the year. Ethereum retreated further, decreasing by 1.65% to $2.95K, while Solana dropped 2.56% to $123.39. Privacy-focused altcoins suffered even larger losses: Monero plunged 11.6%, Dash decreased 9.58% to $55.59, and Zcash fell 6.93% to $364.13.

Beyond cryptocurrencies, the digital asset sector has also suffered. MicroStrategy (MSTR), the largest corporate Bitcoin holder, declined 7.8%, while Coinbase (COIN) fell 5.5% and Circle (CRCL) by 7.5%. This decline is part of a broader movement in financial markets: the S&P 500 dropped 1.8% and the Nasdaq 2%, marking their worst day since October 10, when Trump’s tariff threats had already shaken markets.

The True Drivers of the Decline: Geopolitics, Monetary Policy, and Market Conditions

Three interconnected factors explain this decline in cryptocurrencies and risk assets in general. First, the resolution of the Japanese government bond crisis triggered a wave of massive liquidations of risk positions across global markets. Arthur Hayes, co-founder of BitMEX, warned that the MOVE index (Treasury volatility) approaching 130-140 would likely trigger an emergency intervention, but so far markets are preparing for a painful risk withdrawal phase.

Second, escalating tariff tensions led by the White House have intensified concerns about global economic stability. Trump intensified his threats against Europe precisely on the day crypto markets declined, adding fuel to the fire.

Third, liquidation data reveal an important detail: traders liquidated $486 million in long positions so far on Tuesday, marking the worst two-day series for long positions this year. However, the divergence between Bitcoin and Ethereum tells a nuanced story. While Bitcoin’s open interest slightly increased (from $28.5 billion to $29.3 billion), suggesting traders were taking short positions on this weakness rather than selling spot, Ethereum experienced a larger open interest reduction accompanied by an exceptional trading volume of $36.8 billion over 24 hours, surpassing Bitcoin’s $34.1 billion.

Future Outlook and Risks for Further Decline: How Low?

Analysts are divided on the potential extent of this decline. Veteran trader Peter Brandt mentioned the possibility that Bitcoin could reach between $58,000 and $62,000 within two weeks. However, options data paint a slightly less catastrophic picture: according to Omkar Godbole of CoinDesk, there is a 30% chance that Bitcoin could fall below $80,000 by the end of June. The critical level to watch remains at $87,586, the price at which Bitcoin started the year — below this threshold, all 2026 gains would evaporate.

Mike Novogratz of Galaxy Digital provided an important macroeconomic perspective, stating that gold’s trajectory indicates a loss of appeal for the US dollar as a reserve currency. Gold rose an additional 3% on Tuesday, reaching $4,750, while silver jumped over 7% to surpass $95 per ounce. This divergence between Bitcoin (which is falling) and gold (which is rising) reveals a reshuffling of risk appetites: investors are fleeing more volatile assets for traditional safe havens.

Novogratz emphasized that Bitcoin needs to break through the $100,000–$103,000 range to regain its bullish trend. The trader stated, “I think this will happen over time,” although the timing remains uncertain amid the current decline.

The Resilience of the DeFi Sector Amid the Overall Decline

Paradoxically, the DeFi sector has shown some resilience. The total value locked (TVL) across DeFi protocols continued its upward trend since October 2023, with a series of progressively higher lows. This divergence between falling prices and increasing TVL suggests that DeFi traders are still generating yields using stablecoins, remaining neutral on market direction despite selling pressure.

Canton Network surged 18%, and some alternative tokens like ARC gained 30%, demonstrating that despite the overall decline, pockets of strength persist in the market.

Signals from Traditional Markets: Institutions Reposition

The reaction of institutional investors confirms the extent of bearish sentiment. Danish pension fund AkademikerPension, managing $25 billion, reduced its exposure to US Treasuries, signaling doubts about the safe-haven status of US assets. George Saravelos of Deutsche Bank noted that Europe holds $8 trillion in US bonds and equities, more than double what the rest of the world combined, creating significant rebalancing potential that could amplify turbulence.

However, the results from tech giants offer a note of stability: Microsoft and Meta both reported continued and robust AI spending, suggesting that despite the crypto downturn and geopolitical turbulence, some sectors continue to attract capital.