Bitcoin dipped into the low US$90,000s on Monday, falling more than 4 per cent and reversing its recent gains which propelled it comfortably into the six-figure territory.
While market volatility, in response to the news, and the potential ignition of a full-scale trade war didn’t surprise, what did is bitcoin’s reaction, to an extent.
In a post on his X profile, Chris Weston from Pepperstone explained that despite anticipating it, the market was unprepared for the cryptocurrency sell-off.
“Even though we knew it was going to come, I think people weren’t really prepared for it,” the head of research said on Monday.
“Volatility [is] alive as people try and really understand the retaliation metrics that have been playing through and where this ends, and how we price risk in this scenario.”
Speaking to InvestorDaily, Global X’s Billy Leung explained that tariffs alone may not be what bitcoin is reacting to.
“Bitcoin’s drop below US$100k followed Trump’s tariff announcement, but the move reflects a broader risk-off sentiment and USD strength rather than just trade policy alone,” Leung said.
“While tariffs have raised concerns about inflation and global trade, the bigger driver has been the US dollar rally, which historically pressures bitcoin and other risk assets.”
The investment strategist highlighted that exchange-traded fund (ETF) rebalancing flows are also influencing the market. He explained that while over US$39.5 billion has poured into bitcoin ETFs, macro-driven de-risking could still lead to short-term outflows.
And while bitcoin is 11 per cent off its record high US$109,000, Leung emphasised that what looks like a sharp correction is actually still within historical norms.
“In previous bull markets, bitcoin has seen multiple pullbacks of 20–30 per cent before resuming its uptrend,” he said.
The investment strategist stated that investors are closely monitoring US$90,000 as a “critical support level”, warning that a decisive break below US$90,000 could trigger a further decline towards US$80,000.
“If bitcoin breaks below US$90,000, a key technical support, there is a risk of further downside, but long-term fundamentals remain intact. Institutional demand, ETF adoption, and Layer 2 expansion all point to a maturing asset class,” Leung said.
“Strong institutional demand and continued ETF inflows suggest that bitcoin is developing a more structural bid, which could prevent deeper sell-offs compared to previous cycles,” he said.
According to the strategist, while more volatility could be on the cards, bitcoin is increasingly being treated as a long-term portfolio allocation, as opposed to a speculative trade.
Bitcoin’s appeal and growth have been driven in part by heightened interest from institutional investors.
In December, speaking to InvestorDaily, Stuart Eliot, AMP’s head of portfolio management, said after “testing and careful consideration by our investment team and committee”, the company decided to include “a small and risk-controlled position” in digital assets within its Dynamic Asset Allocation program.
“The exposure, which represents around 0.05 per cent of our total superannuation assets under management, recognises the structural changes in the industry over the past year, including the launch of exchange-traded funds by leading international investment managers,” Eliot said.
“While our super members have benefited from the exposure, we fully appreciate the risk and volatility characteristics of this emerging asset class and will continue to carefully manage our holding, which is a fractional component of a highly diversified asset mix.”
