Why is the Cryptocurrency Market Falling? Reasons and Impact on Investors

Financial markets, including the cryptocurrency and stock markets, are experiencing significant turbulence due to recent actions taken by the administration of President Donald Trump, which imposed widespread tariffs on imports from several countries. These measures have raised concerns about a trade war, leading to a decline in cryptocurrency prices and stock indexes.

Bitcoin (BTC) has fallen by more than 10% in the last 24 hours, reaching a local low of $74,440 on Monday morning. Over the past 30 days, Bitcoin has lost more than 15% of its value, and since the beginning of the year, it has dropped by up to 25%. However, the situation is much worse for Ethereum, which has dropped by as much as 19% in the last 24 hours and has lost nearly 60% of its value since the beginning of the year.

The market capitalization of the cryptocurrency market dropped to $2.37 trillion on Monday morning, its lowest value since November 2024. During periods of steep declines and uncertainty in global financial markets, Bitcoin has increased its dominance over other cryptocurrencies, with Bitcoin’s dominance rising to 64% over the weekend, the highest since February 2021.

However, it is not just the cryptocurrency market that is struggling. The S&P 500 index closed last Wednesday at 5,669.42 points, and within 2 days, it dropped by more than 10.5%, closing on Friday at 5,073.28 points. Other stock indexes, such as Nasdaq, also fell by more than 10% over the last 5 days. Wall Street recorded its two worst days since the COVID-19 pandemic began in 2020.

Monday looks set to be another challenging day for financial markets. During pre-market hours, the S&P 500 index continued its sell-off, dropping by another 4%, while other indexes, such as Nasdaq and Russell 2000, saw even larger losses. European stock indexes also saw significant drops on Monday morning after market openings, with the FTSE 100 index losing more than 5%, while the German DAX index dropped by more than 6%.

“Trump’s announcement of tariffs this week wiped out billions from the stock market, similar to what happened during the worst week of the 2008 financial crisis,” summarized the situation by financial commentator Holger Zchaepitz on the social media platform X. Some sources report that since Donald Trump’s inauguration, the stock market wiped away up to $10 trillion, which is four times the entire cryptocurrency market capitalization.

Trump’s Statements

The Trump administration imposed a 10% tariff on all countries from April 5, with higher tariffs on specific countries, including China, which faced a 34% tariff, and the European Union, which was subjected to a 20% tariff.

President Trump defended the imposition of tariffs by stating that the U.S. has large trade deficits with China, the European Union, and other countries, which need to be addressed. He declared that the tariffs were already bringing billions of dollars to the U.S. and referred to them as “a beautiful thing to look at.” Despite market volatility concerns, he stated that his goal was not to deliberately cause sell-offs in the financial markets, but that sometimes it is necessary to “use a remedy to solve the problem.”

Trump’s aggressive policy of imposing tariffs on various countries has significantly heightened fears of a potential trade war, with some experts even suggesting that a trade war has already begun.

Before the weekend, it seemed that cryptocurrencies might resist the aggressive tariff policy. After sharp declines in the stock market on Thursday and Friday, Bitcoin and other cryptocurrencies held up well, showing practically no significant movements. However, due to the 24/7 nature of the cryptocurrency market, investors switched to a selling mode on Sunday, causing cryptocurrencies to plunge.

Massive Liquidations in Derivatives Markets

Futures contracts tied to major cryptocurrencies saw more than $1.2 billion worth of long position liquidations in the last 24 hours as most major crypto assets dropped by over 10%. Liquidations occur when exchanges close leveraged positions due to traders’ inability to meet margin requirements. These liquidations help to reduce the market’s leverage, thereby lowering the overall risk associated with excessive leverage. Data also showed that nearly 86% of all futures traders had been betting on a rise in the cryptocurrency market in recent days, expecting a short-term improvement in sentiment.

Source: Coinglass

Extensive liquidations often signal extreme market behavior—such as panic sell-offs during steep price declines or mass buying during substantial price rises. If a so-called liquidation cascade occurs (a series of leveraged position closures), it can indicate that the market is close to a turning point. Forced selling during a downturn may accelerate price declines and potentially prepare the ground for a sharp rebound once the excess leverage is removed from the market.

Bitcoin and Ethereum Facing a Challenging First Quarter

In Q4 2024, Bitcoin surpassed the $100,000 mark for the first time in history, and several other crypto assets experienced massive growth, fueling hopes for a similar positive trend in Q1 2025. However, this did not happen, and the reality was quite different, driven by the aggressive policies of Donald Trump.

Instead of the euphoria surrounding potential Bitcoin reserves, which Donald Trump fervently promised before the elections, crypto investors did not see these promises fulfilled, affecting sentiment in the market. Alongside global tensions and the potential for a trade war, Bitcoin had its worst first quarter (Q1) since 2019, dropping by 11.82% during the first three months of this year. However, Ethereum fared much worse, experiencing one of its worst quarters in history, dropping by 45.41% in Q1.

Source: Coinglass

The second quarter also does not look promising so far. In the first seven days of April, Bitcoin lost nearly 9% of its value, while Ethereum has lost significantly more during the current correction.

Fear & Greed Index and Altcoin Season Index

According to data from alternative.me, the cryptocurrency Fear and Greed Index dropped to 23 points after Bitcoin fell below the $75,000 mark. Experts state that investor sentiment in the cryptocurrency market is currently very weak, with a significant number of investors expressing their concerns by selling off their assets into stablecoins or fiat currencies, mainly due to fears of a trade war, global uncertainty, and concerns over a potential continuing decline.

Source: Alternative.me

Similarly, the so-called altcoin season index, which compares Bitcoin’s performance over the past 90 days to the 50 largest alternative cryptocurrencies, is currently showing that Bitcoin has outperformed altcoins. This index helps investors understand whether altcoins are outperforming Bitcoin over a given time period, providing insights into market trends and potential investment opportunities.

The index dropped to 18 points out of 100 on Monday morning, indicating a so-called Bitcoin season—meaning Bitcoin performed better than altcoins or declined less than other alternative cryptocurrencies. However, in the past, when this index fell below 20 points, it signaled a “restart” and a renewed interest in altcoins.

Source: Coinglass

Take Advantage of Market Declines and Invest in Cryptocurrencies with Fumbi

At first glance, cryptocurrency price declines may seem alarming. Many investors panic when they see red numbers and sell, but more experienced investors see it as an opportunity. Market declines provide the ideal moment to buy and average down your entry costs.

Why Are Market Declines Ideal for Investing?

When cryptocurrency prices drop, it means you can buy them at a discount. It’s like when you come across a sale in a store—you buy a product because it is cheaper. The same principle applies to investing. Buying and expanding your portfolio during market declines allows you to acquire more cryptocurrencies for the same amount of money, which increases your potential profit if the market starts to rise again.

An Opportunity for Long-Term Investors

If you have a long-term investment horizon, corrections can be a great opportunity to take advantage of. Instead of panicking and selling at a loss, you can expand your portfolio and invest at better entry prices, which can benefit you in the long run.

With Fumbi, It’s Easy

Fumbi lets you invest in cryptocurrencies comfortably, securely, and without having to worry about any technical details. You can choose from several options, such as portfolio products like the Fumbi Index Portfolio or the Bitcoin and Gold index, or create your own portfolios through the Advanced Portfolios product.

But if you want to invest in individual cryptocurrencies, we have great news for you – just a few days ago, we expanded our Fumbi Custom product, which now includes over 100 cryptocurrencies that you can invest in with just a few clicks.