Bitcoin Market Update

Bitcoin (BTC) started Monday in the red with a 2% drop over the past 24 hours, according to CoinDesk Indices data. This decline contributed to a broader market downturn, with major tokens falling as much as 5%.

BTC touched resistance at $84,000 on Sunday, making it a significant level to overcome for potential upward movement. As of Monday afternoon in Asia, BTC was trading just over $83,300.

Major Cryptocurrencies’ Performance

Cryptocurrencies like XRP, Solana’s (SOL), Cardano’s (ADA), and Dogecoin (DOGE) saw decreases of up to 5%. In contrast, BNB Chain (BNB) was an outlier, showing resilience with a 3% increase.

The cryptocurrency market has remained stagnant following a sell-off last week attributed to U.S. tariffs and worsening macroeconomic conditions. Traders express concerns about a potential U.S. recession due to tariffs imposed by Trump, fueling expectations of choppiness ahead as the correlation with U.S. equities remains strong.

Despite this, some anticipate increased volatility in altcoins and memecoins due to the flat market regime. Nick Ruck, director at LVRG Research, noted that trading volume for altcoins has increased since Trump’s World Liberty Financial purchased MNT and AVAX, the latter being part of an ETF application by VanEck.

Market Outlook

Traders speculate that the recent sell-off may have been triggered by unwinding ETF and spot-linked trades. They emphasize that equity valuations outside major large caps are relatively stable when compared to historical averages, suggesting a ‘buy the dip’ mentality as the market navigates tariff volatility.

Augustine Fan, Head of Insights at SignalPlus, stated that the current decline seems driven by predominant ‘multi-strat’ hedge fund strategies in the macro space. These strategies utilize diverse tactics such as arbitrage, long-short positions, and leverage to maximize returns across different asset classes.

In the context of Bitcoin, an essential multi-strat approach includes the basis trade, where funds buy spot BTC (often via ETFs) and short BTC futures to capture price differences, locking in low-risk profits.

Should the profits from basis trades diminish due to tightened spreads or market variations, funds may liquidate positions, leading to widespread selling of Bitcoin and ETF shares, further exacerbating the market downturn—especially amidst recent tariff-related instability.

However, a ‘buy-the-dip’ sentiment remains strong among optimistic investors. Fan concluded that economic hard data is expected to outpace the recent downturn in softer data, reinforcing the prevalent view that the market retains ‘buy the dip’ characteristics as it grapples with tariff-induced fluctuations.