The moment cryptocurrencies lose their value: $89,000 fall caused by tariff wars and bond sell-offs

Bitcoin on Tuesday fell below $89,000, delivering a significant shock to the entire cryptocurrency market. This rapid decline suggests that it is not merely a price adjustment but indicates that market participants are beginning to reassess the intrinsic value of risk assets. The convergence of serious turmoil in the Japanese government bond market and threats of increased US tariffs has made it clear why traders are turning away from cryptocurrencies.

Why Are Cryptocurrencies Falling Now: A Macro Economic Turning Point

The decline in the cryptocurrency market reflects a fundamental change in the macroeconomic environment, rather than superficial price fluctuations. A sharp rise in long-term Japanese government bond yields triggered a chain reaction of global bond sell-offs. Under this environment, US President Donald Trump’s remarks hinting at increased tariffs on Europe further strengthened investors’ risk aversion.

Currently, Bitcoin is trading around $88.35K, dangerously close to the $87,586 level at the start of the year. If this level is broken, all profits accumulated since the beginning of the year will be wiped out. Such a sharp drop in just over three weeks since the start of the year is a highly serious concern for market participants.

Trader Movements: The Market Sentiment Indicated by the Surge in Short Positions

Interestingly, different movements are observed in the Bitcoin derivatives market. Despite the price decline, open interest increased from $28.5 billion to $29.3 billion. This indicates that traders are responding not with spot sales but with short positions (trades anticipating further decline). Veteran Peter Brandt warns of further declines, mentioning the possibility that Bitcoin could reach between $58,000 and $62,000 within two weeks.

Options market data is even more pessimistic. According to analysis by Omkar Godbole, a colleague at CoinDesk, there is a 30% chance that Bitcoin will fall below $80,000 by the end of June. In response to these warning signals, Galaxy Digital founder Mike Novogratz points out that Bitcoin needs to break through the $100,000 to $103,000 level to regain an upward trend, indicating that the path is by no means short.

What Is Happening Below $89,000 for Bitcoin

On Tuesday, related stocks also took a big hit. Bitcoin’s large holders’ company Strategy (MSTR) fell 7.8%, and Ethereum’s major holder company Bitmine Immersion Technologies (BMNR) plunged 9.5%. Cryptocurrency exchanges Coinbase (COIN) and stablecoin issuer Circle (CRCL) also declined by 5.5% and 7.5%, respectively.

In the broader market, the S&P 500 and Nasdaq 100 each fell more than 2%, and the Wall Street fear index VIX rose about 5%. A total of $486 million in long positions were liquidated within 24 hours, adding to Monday’s liquidation, marking the worst two consecutive days of long liquidations since 2026. Meanwhile, Ethereum’s price dropped 6%, but trading volume reached $36.8 billion in 24 hours, surpassing Bitcoin’s $34.1 billion.

Why Gold Shines While Cryptocurrencies Lose Value

Contrasting movements are observed in the gold market. Gold rose another 3% on Tuesday, reaching $4,757.30. Silver also showed gains of over 7%, trading around $94.25. Privacy coins Monero (XMR) and Dash (DASH) saw significant declines, falling 11.6% and 8.83%, respectively. Meanwhile, Zcash (ZEC) recovered to $365.52, but the effects of the organizational split following the governance dispute in early January still persist.

James Harris, CEO of Tessera Group, states, “The strength of gold is understandable given the current macroeconomic environment. Ongoing geopolitical tensions, US fiscal uncertainty, and strong central bank support reinforce its role as a defensive hedge.” He also points out, “Bitcoin is lagging because liquidity is tighter and risk appetite is more subdued.”

Why do traditional assets increase in value when cryptocurrencies seem to be losing theirs? The answer lies in current geopolitical uncertainties and US fiscal concerns. Anders Schelde, Chief Investment Officer at Denmark’s pension fund AkademikerPension, states that the US credit rating is essentially not good, and long-term fiscal sustainability is in question. George Saravelos of Deutsche Bank mentions that Europe holds $8 trillion in US bonds and equities, warning that changing geopolitical conditions could further prompt a rebalancing of dollar assets.

Market Participants’ Warnings: Signals for the Future of the Cryptocurrency Market

Arthur Hayes, co-founder of BitMEX, emphasizes how the market is closely watching the turmoil in the Japanese bond market and its potential spillover into US Treasuries. These concerns are not just short-term volatility but are prompting a fundamental reassessment of the valuation of cryptocurrencies.

The Fear and Greed Index has shifted from greed back to fear, with the optimism near $96,000 completely dispelled. Regarding President Trump’s tariff policies, the White House has also mentioned the possibility of lawsuits from the Supreme Court, raising concerns that such uncertainties could trigger further market chaos.

Currently, Bitcoin is trading around $88.35K, Ethereum at $2.96K, and Solana at $123.66. XRP has declined about 4% within the month, but net inflows into spot ETFs continue at $91.72 million, maintaining solid demand in certain sectors. The DeFi market shows resilience amid overall selling pressure, with total value locked (TVL) across protocols maintaining an upward trend, suggesting that the revaluation of risk assets is still ongoing.

Whether cryptocurrencies have truly lost their value or are merely experiencing a temporary correction depends on future geopolitical developments and the direction of US fiscal policy. As evidenced by market warnings and behavioral patterns, the perception of cryptocurrency value is currently in a highly fluid state.