Crypto Market Suffers Sharp Downturn Amid Policy Uncertainty

The recent price fluctuations in the crypto market have caught investors off guard, with Bitcoin experiencing a sharp pullback on Monday. According to data from CoinGecko, Bitcoin fell roughly 4.6% from $67,600 to $64,435 in less than two hours during early Asian trading.

This sudden collapse has resulted in over $505 million in liquidated positions across all assets over the past 24 hours, per CoinGlass data, with Bitcoin accounting for $232 million and Ethereum for $126 million. The downturn was not triggered by a sudden 'black swan' event or unexpected negative news but rather driven by policy uncertainty stemming from fluctuations in U.S. tariff policy, compounded by rising geopolitical risks.

Tim Sun, senior researcher at HashKey Group, pointed to a confluence of pressures: sticky December PCE inflation data, Middle East tensions pushing crude oil to periodic highs, and interest rate markets now pricing out any chance of a March rate cut. As a result, risk assets are repricing amid fluctuations in tariff policy and geopolitical tensions rather than crypto-specific catalysts.

The broad contraction in risk appetite is evident in the crypto market's drop and gold's 1.23% uptick today, at $5,166 per ounce. Analysts predict that the market may face a protracted bottoming process due to increased uncertainty, with limited inflows expected in the near future.