The crypto market is facing another steep decline after recently recovering from a major crash. The global market cap has dropped by about 9.5%, at press time, wiping out nearly $500 billion in value.
Bitcoin is testing the $83k mark again, while most altcoins are trading in the red. The sudden reversal follows a brief surge triggered by the announcement of the US Crypto Reserve. However, broader market conditions and shifting sentiment have fueled a sharp downturn.
The latest downturn erases most of the gains seen after former U.S. President Donald Trump announced the US Crypto Reserve.
What is happening with crypto?
— The Kobeissi Letter (@KobeissiLetter) March 4, 2025
Crypto markets are now worth -$100 billion LESS than they were prior to the US Crypto Reserve announcement.
Over the last 24 hours, crypto has erased -$500 BILLION of market cap in a massive reversal.
Here's what you need to know.
(a thread) pic.twitter.com/xlsqsnQKKd
According to The Kobeissi Letter, crypto’s market cap had surged from $2.7 trillion to $3.1 trillion following the announcement. Within 24 hours, it plummeted to $2.6 trillion, falling below its pre-announcement level.
Ethereum mirrored this trend, rising from a low of $2,173 to $2,550 before dropping to $2,002. This represents an 8% decline below its previous bottom. The Kobeissi Letter noted that the Crypto Fear & Greed Index jumped from extreme fear at 20 to near greed at 55, only to drop back to 24. The rapid sentiment shift suggests a major retail bull trap.
Read also: XRP Price Prediction as Ripple Whales Go on a Buying Frenzy
Bitcoin and Altcoins See Sharp Declines
Bitcoin has fallen 3% below its price before the US Crypto Reserve news. Over the past 12 hours, the top cryptocurrency has erased nearly $250 billion in market cap. Many altcoins have followed suit, with heavy losses across the board.
The broader market is also seeing outflows. Crypto funds recorded a record weekly outflow of $2.6 billion in February, surpassing previous highs. The Kobeissi Letter highlighted that capital is now shifting away from risky assets, impacting crypto prices.
The current crash is part of a larger global shift toward risk-off assets. Rising trade war tensions and economic policy uncertainty have hit stocks, oil, and crypto markets alike. Safe-haven assets such as gold are benefiting from this shift.
The Kobeissi Letter pointed out that Bitcoin is down 10% year-to-date, while gold has gained 10%. A Bank of America survey found that 42% of respondents see trade war risks as the biggest threat to risk assets in 2025.
Meanwhile, only 3% believe Bitcoin would perform best in a full-scale trade war. This data suggests that investors no longer view crypto as a hedge during uncertainty.
Goldman Sachs’ volatility panic index surged from 1.4 in December to 9.1 last week and is nearing 10. This indicates heightened market swings, with more turbulence ahead for crypto.
With capital rotating out of digital assets and risk sentiment worsening, further downside pressure may persist in the near term.
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