Rising Risks in the Bitcoin Market
Recent data from Derive.xyz’s on-chain options market reveals a concerning trend for Bitcoin (BTC) investors. The probability of Bitcoin’s price crashing to $75,000 by March 28 has surged to 22%, a significant increase from last week’s 10% estimate. This shift highlights growing market anxiety as external economic factors come into play.
Impact of Tariffs on Global Inflation
The spike in this probability coincides with renewed trade tensions between the United States and its primary trading partners, including Canada, Mexico, and China. Former President Trump’s recent tariffs—25% on imports from Canada and Mexico and 10% on goods from China—are anticipated to escalate inflationary pressures. Such inflation could complicate monetary policy for central banks, particularly the Federal Reserve, making it challenging to lower interest rates.
According to Derive, the increased tariffs are likely to dampen investor sentiment in cryptocurrency markets, which are already struggling to maintain momentum.
Market Reactions and Current Prices
The cryptocurrency market has already experienced turmoil, with Bitcoin plummeting 11% to $93,700 within just four days, according to CoinDesk data. Meanwhile, Ethereum (ETH), the second-largest cryptocurrency by market capitalization, fell below $2,200, marking its lowest point since August 5.
Market analysts are closely watching Bitcoin’s price patterns, as it appears to be forming a double top reversal. This technical pattern could pave the way for a further decline to $75,000.
Insights from Industry Experts
Arthur Hayes, the chief investment officer of Maelstrom and former CEO of BitMEX, has suggested that Bitcoin may first dip to around $75,000 before entering a more significant bull run. Despite this bearish sentiment, Derive maintains a constructive outlook in the long term.
There is growing optimism surrounding the potential approval of several active spot Exchange-Traded Fund (ETF) filings for cryptocurrencies such as DOGE, SOL, XRP, and LTC by major players like Bitwise and Grayscale. Approval from the SEC could lend greater legitimacy to the digital asset space, enticing more capital inflows and potentially boosting prices.
Federal Reserve’s Role in the Market
Andre Dragosch, head of Europe at Bitwise, expressed expectations that the Federal Reserve might intervene to stabilize asset prices. He noted that at some point, the Fed will likely need to reintroduce quantitative easing (QE) to counteract the rising dollar and prevent further tightening of financial conditions, which could hinder global economic growth.
In summary, while the immediate outlook for Bitcoin appears challenging amid tariff-induced inflation fears, the longer-term prospects could improve with potential regulatory advancements and Federal Reserve interventions.
