Bitcoin Market Tumbles as Memecoins Grab Liquidity, Trump Inaction Adds to Woes

The crypto market is a sea of red, with bitcoin trading at three-month lows under $88,000 and the CoinDesk 20 Index down more than 10% in 24 hours.

Bitcoin (BTC) price dropped to three-month lows below $88,000 during early Asian hours on Monday, while the CoinDesk 20 Index fell by more than 10% over the past 24 hours.

Several catalysts could be identified for the downturn, including risk-off sentiment in traditional markets and the influence of memecoins, particularly the recent trading activity in TRUMP and LIBRA.

As reported earlier, market makers present at the Consensus Hong Kong conference last week expressed concerns that the memecoin frenzy might have sucked liquidity away from productive crypto sub-sectors, rendering the broader market more vulnerable.

Another factor cited was President Donald Trump’s lack of action. Despite making significant promises in the lead-up to the elections, concrete measures have been largely absent.

"The industry is still waiting for this to manifest in a tangible way in the form of measures such as a mooted Bitcoin Strategic Reserve," Petr Kozyakov, co-founder and CEO at Mercuryo, told CoinDesk.

"In the meantime, sentiment has been hit hard by the biggest ever hack at the Bybit exchange, leaking 401,000 ETH, and a memecoin sector plagued with high-profile pump and dump schemes."

Finally, there were also renewed concerns regarding the U.S. economy, which seemed to be reducing demand for riskier assets.

"There is also some concern about the slowdown in U.S. growth since last week's U.S. Services PMI release, the lowest in 22 months and consistent with GDP growth tracking at 0.6% only," said Aurelie Barthere, principal research analyst at Nansen. "Our Nansen Risk Barometer also just turned Risk-off from Neutral today."

Together, these developments pushed BTC out of its two-month range play between $90,000 and $110,000. Technical analysis theory suggests it could now drop to $70,000, although the maximum open interest in BTC put options listed on Deribit is at the $80,000 strike, indicating this level could offer some support.

What could stabilize prices? Maybe an announcement from Trump regarding a strategic reserve or a sharp reversal by the Nasdaq 100.

However, the index fell below its 50-day simple moving average (SMA), while the yen, a risk-aversion signal, continued to strengthen against G7 currencies, including the dollar.

The next major catalysts for risk assets are Nvidia's earnings on Feb. 26 and core PCE inflation on Feb. 28.