Bitcoin (BTC) Opens the Week with a 2% Decline

Bitcoin (BTC) has opened the week with a 2% decline over the last 24 hours, according to data from CoinDesk Indices. This downturn is contributing to broader market struggles

Bitcoin (BTC) began the week in the red, dropping 2% over the last 24 hours, according to CoinDesk Indices data on Monday afternoon in Asia. The downturn in the world’s largest cryptocurrency contributed to broader market struggles, with several major coins like XRP, Solana (SOL), Cardano (ADA), and Dogecoin (DOGE) also slipping by as much as 5%. In contrast, BNB Chain (BNB) showed some resilience, rising 3%.

Bitcoin approached a critical resistance level at $84,000, which traders have identified as a crucial point for future upward movement. As trading commenced on Monday afternoon in Asia, BTC/USD slipped below the $83,300 level.

The recent declines in the crypto market can be largely attributed to last week’s sell-off linked to U.S. tariffs and worsening macroeconomic conditions. Traders are now expressing concerns about a potential U.S. recession, a factor that could herald increased volatility as the correlation between cryptocurrency and U.S. equities remains noteworthy.

Despite the current market difficulties, there is still some optimism for volatility in altcoins and memecoins. Trading volumes have reportedly risen for these alternative assets, fueled in part by strategic investments such as Trump’s World Liberty Financial purchasing MNT and AVAX—both subject to VanEck’s ETF application. Nick Ruck from LVRG Research highlighted this increased activity as an indicator that traders may be seeking higher returns from altcoins in the near term, rather than relying on larger capitals like Bitcoin or Ethereum.

The present sell-off is believed to be influenced by the unwinding of ETF and spot-linked trading strategies. Traders indicate that while large-cap equities remain somewhat insulated compared to historical norms, recent concerns surrounding economic indicators may prompt a “buy the dip” mindset as the market navigates tariff-related volatility. Augustine Fan, Head of Insights at SignalPlus, remarked on this sentiment, suggesting that hard economic data may outpace the deteriorating soft data.

The strategy employed by many hedge funds, known as multi-strategy (multi-strat) trading, involves varied tactics—including arbitrage and long-short positions—to achieve optimal returns across diverse asset classes. In Bitcoin’s context, a prevalent multi-strategy approach entails executing basis trades where funds buy spot Bitcoin (often through ETFs) while shorting Bitcoin futures to benefit from pricing differentials. However, when the profitability of these basis trades declines—either due to tighter spreads or shifts in market dynamics—funds may liquidate their positions en masse, exacerbating market sell-offs.

Even with the pressures in the market, the prevailing sentiment among bullish investors leans towards a buy-the-dip outlook, anticipating recovery as market volatility associated with tariffs continues. The consensus suggests that economic fundamentals may support buying opportunities, fueling hopes for a resilient market rebalance in the months ahead.