On Jan. 30, bitcoin was worth over USD 105,000 after a blistering post-election rally, now it is hovering around USD 90,000. What happened?
While Trump’s election triggered the move above the key USD 100,000 level, investors may have overestimated the impact of his presidency on the asset class, says Adrian Fritz, head of research at 21Shares, a specialized provider of crypto ETPs. This selloff comes as a realization that reforms will take longer than expected, he says; the latest decline may also be a healthy correction.
“Immediately after the US election, the price of bitcoin quickly rose, which makes a correction almost inevitable and helps the price of the asset to rise in a structured way, removing the speculative component.”
Are Trump’s Tariffs a Risk for Bitcoin Prices?
Another factor may also be a wider risk aversion among investors, who are worried about trade tariffs triggering an economic slowdown, says Dovile Silenskyte, director of digital asset research at WisdomTree. Stubborn inflation means interest rates may remain higher for longer too.
“A changing market sentiment, particularly regarding interest rates and liquidity conditions, has played a role.”
“A more hawkish attitude from central banks or concerns about an economic slowdown may lead to a risk-reducing attitude, impacting bitcoin and traditional assets.”
The recent attack on crypto exchange Bybit has also generated uncertainty among retail investors and revived concerns that a systemically important operator may fail. On Feb. 21, the exchange was the target of a hack attack attributed to the North Korean hacker group Lazarus caused a loss of 401,346 ethereum (USD 1.4 billion). This has triggered significant outflows from bitcoin ETFs.
“It was a sophisticated attack but similar to others seen in the past,” says Ferdinando Ametrano, managing director of CheckSig and a professor of Bitcoin and Blockchain Technology at Milan-Bicocca University. “This is a clear warning to the crypto industry”, he says. “Security cannot be taken for granted and requires a balance of advanced technology, rigorous standards, independent audits, and effective risk management.”
The Risks of Investing in Bitcoin in 2025
The bitcoin price has also been pulled down by increased volatility in financial markets on fears of a global trade war after US President Donald Trump imposed new tariffs on imports from Canada, Mexico, and China.
But isn’t this volatility and macroeconomic uncertainty exactly what bitcoin was created for?
“More and more investors have begun to understand its role as an inflation defense and defensive asset,” Fritz says.
“However, in recessions, the first assets to be liquidated are the risky ones, and this often negatively offsets bitcoin’s positive characteristics”.
Cryptocurrency investors know well that overreactions to regulatory developments, macroeconomic changes or social media hype can lead to panic buying and selling, amplifying short-term price swings. Beyond market psychology, however, Silenskyte identifies regulatory uncertainty and possible liquidity shocks as the biggest risks.
“Bitcoin is a volatile asset, but today its volatility is comparable to that of major tech stocks,” says Ametrano.
“The main risk remains the investors lack of awareness: one does not invest in bitcoin to speculate in the short term but to diversify the portfolio and protect assets in the long term.
“For investors a strategic allocation to bitcoin should be aligned with risk tolerance and broader portfolio objectives, ensuring that exposure enhances risk-adjusted returns rather than amplifying losses due to volatility.”
Where Next for Bitcoin Prices?
Ferdinando Ametrano expects bitcoin to reach USD 140,000 in the next 12 months, driven by “the gradual entry of European financial players” into the crypto universe. He thinks that the opening of the institutional market will bring new capital, strengthening the adoption and maturity of the ecosystem.
“Volatility will remain but with different dynamics than in the past: the greater presence of institutional investors could reduce the intensity of retracements, making correction phases more orderly than in previous cycles,” he says.
On March 7, the White House will host the first cryptocurrency summit, an event that will bring together industry leaders to discuss regulatory policy, stablecoin oversight, and bitcoin’s potential role in the US financial system. This policy alignment could kick off innovation-friendly legislation, signaling a shift from the regulatory hostility of the Biden years to a more supportive framework.
Dovile Silenskyte warns that challenges remain, especially if lighter regulation draws in rogue operators, a trend seen in the “crypto winter in 2022” when the FTX scandal broke.
“While deregulation could accelerate growth, too little oversight could invite bad actors, leading to future instability. Investors should follow key policy developments closely, as the next 6-12 months will define the trajectory of digital assets under Trump’s administration,” she says.
The author or authors do own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
