Bitcoin’s recent drop to around $87,790 signaled more than routine price swings, it underscored how quickly confidence can vanish in volatile markets.

From a 2026 peak near $98,000, bitcoin surrendered roughly 10% of its value in under 48 hours, erasing all year-to-date gains and marking the steepest pullback since November.

Extreme Fear Grips Crypto Market

Crypto market sentiment turned sharply negative, with the Crypto Fear and Greed Index tumbling to 24, firmly in “extreme fear” territory.

During this period, over $1.8 billion in long positions were liquidated across crypto markets. The total crypto capitalisation fell by roughly $225 billion, revealing how exposed bullish positions had become.

Factors Behind Bitcoin’s Sharp Pullback

Global Risk Aversion Spurs Selling

The initial catalyst originated outside the crypto sphere. Renewed tariff threats from US President Donald Trump triggered global risk-off sentiment, affecting investors already anxious about inflation, slower growth, and geopolitical tensions.

As equities became volatile, capital rotated toward safer assets. Bitcoin, acting more like a high-risk asset than a hedge, declined rapidly as sentiment shifted.

Japanese Bond Market Adds Pressure

A simultaneous sell-off in Japanese government bonds pushed yields higher and raised concerns about the stability of a major global market.

While indirectly related to crypto, stress in large, liquid bond markets often prompts investors to reduce exposure in other risk assets. Bitcoin was one of the first to feel the impact.

Leverage and Liquidations Amplified the Decline

The crypto market’s reliance on leverage intensified the sell-off. Margin calls triggered automatic liquidations, pushing prices lower in a self-reinforcing cycle.

Once traders realised long positions were crowded, confidence evaporated, liquidity thinned, and volatility surged, accelerating the downward spiral.

Technical Breaks Deepen Market Unease

Bitcoin also breached its 50-day exponential moving average, a key support level from the January rally. For many traders, this breach was more of a psychological signal than a purely technical one, suggesting a potential shift from a healthy pullback to a broader trend change. Retail traders forced out of positions or reducing exposure drained liquidity further, making rebounds more difficult.

Institutional Eyes on Bitcoin ETFs and Futures

Institutional investors are monitoring spot bitcoin ETF flows, futures open interest, and funding rates for clues about whether market confidence is stabilising or continuing to decline.

Potential Scenarios Moving Forward

The market outlook remains uncertain.

• Optimistic Scenario: If macroeconomic pressures ease and bond markets stabilise, bitcoin may enter a period of consolidation, allowing leverage to unwind and sentiment to recover gradually.
• Pessimistic Scenario: Persistent geopolitical tension and stress in global bond markets could keep risk appetite muted, making it difficult for bitcoin to reclaim key technical levels. Altcoins, with thinner liquidity, may suffer disproportionately.

Crypto’s Growing Link to Global Markets

Bitcoin no longer exists in isolation. As it becomes more integrated into global portfolios, it is increasingly influenced by macroeconomic events affecting equities, bonds, and currencies.

While crypto markets operate 24/7, fear in traditional markets now drives rapid reactions in digital assets. As this integration deepens, correlations with global financial markets are expected to strengthen rather than fade.