Bitcoin’s Price Drop $85k

• Research suggests Bitcoin’s price drop is primarily driven by the tariff war, causing market uncertainty.
• It seems likely that SEC regulations and inflation concerns also contribute, though to a lesser extent.
• The evidence leans toward tariffs, especially Trump’s 25% on Canada/Mexico and 10% on China, spurring investor sell-offs in risky assets like Bitcoin.
• There’s debate on Bitcoin’s role as an inflation hedge, with current market fear overshadowing its potential long-term benefits.

On February 26, 2025, Bitcoin has experienced a significant price drop, touching $85,000. This decline has raised concerns among investors and market analysts, prompting a deep dive into the factors at play. The primary drivers appear to be the ongoing tariff war, regulatory actions by the Securities and Exchange Commission (SEC), and concerns over inflation.

Tariff War

On January 31, 2025, Trump promised to impose 25% tariffs on goods from Canada and Mexico, effective February 1, and a 10% tariff on Chinese imports, which went into effect on February 4. These measures have created a wave of uncertainty in global markets, leading investors to move away from risky assets like Bitcoin towards safer havens such as government bonds.

According to a report by the Federal Reserve Bank of Boston, these tariffs are expected to increase core inflation by approximately 0.2 percentage points, potentially slowing economic growth. The market’s reaction has been swift, with Bitcoin experiencing a sharp decline.

For instance, before the announcement, Bitcoin was trading at around $105,000, but by February 2, it had dropped to approximately $95,000, and continued to fall to $85,000 by today. This correlation is evident in market analyses, such as one from CoinDesk, which noted Bitcoin’s range-bound behavior between $90,000 and $109,000 for the past 2.5 months, despite the tariff uncertainty.

SEC’s Role in the Crypto Market

The SEC has been actively enforcing regulations in the cryptocurrency space, which has added to the market’s volatility. While there haven’t been any specific recent actions directly causing the current price drop, the ongoing regulatory scrutiny has created a cautious atmosphere among investors.

A recent statement from the SEC indicates a scaling back of its crypto enforcement efforts, with some lawyers being reassigned, as reported by The New York Times The New York Times. This move, initiated under President Trump’s administration, aims to promote the growth of crypto and reduce regulatory overreach, potentially signaling a less restrictive environment.

However, the uncertainty surrounding the regulatory landscape continues to influence investor sentiment. The SEC’s historical enforcement actions, such as those against unregistered crypto asset offerings and pyramid schemes, have kept the market on edge. For instance, in 2024, the SEC brought 33 cryptocurrency-related enforcement actions, focusing on initial coin offerings (ICOs) and non-fungible tokens (NFTs), with 82% of ICO-related actions involving fraud allegations Cornerstone Research. This history of regulatory action contributes to the perception of risk, even if current efforts are being scaled back.