Bitcoin's recent rally was short-lived as the cryptocurrency fell below $83,000 on Tuesday, erasing gains sparked by President Donald Trump's announcement of a U.S. strategic crypto reserve. The decline came amid broader market weakness, as traders reacted to new U.S. trade tariffs on Canada and Mexico, fueling a risk-off sentiment.
Bitcoin dropped 2% to $83,508.78, according to Coin Metrics, putting it 23% below its all-time high. The sell-off followed a $10,000 plunge within 24 hours, wiping out excitement over Trump's crypto reserve initiative. "The lack of information on the amount of crypto the U.S. government will buy, and how the purchase will be funded, coupled with fears of a market retreat if expectation does not meet reality, means that the likelihood of high volatility in the crypto markets will continue," Deutsche Bank analyst Marion Laboure said in a note Tuesday.
Altcoins also felt the impact, with Solana's SOL token fully reversing its gains, while smaller-cap coins like Ripple's XRP and Cardano's ADA managed to hold onto some of their earlier increases. Shares of Coinbase, Robinhood, and Strategy, formerly known as MicroStrategy, fell in premarket trading.
Traders attributed the decline to growing fears of a trade war, which overshadowed optimism around Trump's surprise embrace of Bitcoin. The Kobeissi Letter, a financial analysis firm, described a "global move" away from risk assets, stating that "as trade war tensions rise and economic policy uncertainty broadens, ALL risky assets are falling." The S&P 500 and Nasdaq Composite closed Monday down 1.76% and 2.64%, respectively.
Gold, by contrast, saw continued strength, consolidating gains near its all-time high as investors sought safety. "Take a look at the sharp divergence between Gold and Bitcoin in their YTD performance," Kobeissi wrote. "While gold prices are up +10%, Bitcoin is down -10% since January 1st. Crypto is no longer viewed as a safe haven play."
Bitcoin's price drop also coincided with technical factors. The cryptocurrency fell toward its 200-day simple moving average, a key support level for bull markets. "Important area to watch as you rarely get these tests during a big high timeframe run. Also a key level to hold for the bulls," trader Daan Crypto Trades noted.
Some analysts had speculated that Trump's strategic crypto reserve plan would act as a catalyst for Bitcoin's recovery. However, with no clear details on the size of the reserve or the timeline for government purchases, investor enthusiasm has waned. Bitcoin had already struggled in February, posting its worst monthly performance since 2022.
This week, investors will be closely watching the inaugural White House Crypto Summit on Friday for further details on the administration's plans to support the industry. The event is expected to provide insight into regulatory clarity, which analysts say could be a more meaningful driver for Bitcoin's long-term trajectory.
