Bitcoin price rebounded emphatically off support at $60,000 on the first strong signal of activity at the bottom, after giving up all of its gains from the Trump rally – but is it Trumpism in crypto that is at the root of crypto’s woes?
There is certainly more hope in the air as the European session opens this morning, with Bitcoin trading above $66,400.
But all the factors that caused the crash are still in play. Crypto leverage, crowded tech trading, high-risk asset correlation, and doubts about the Bitcoin narrative are all part of the bear market mix.
Turn on your Bloomberg Terminal and create a chart to show the correlation between Bitcoin (XBT/USD), The Magnificent 7, Tech Stocks (BM7T) and the Bloomberg AI Value Chain Total Return Index (BAIVT) and you will see the following (thanks to Kathleen Brooks, Director of Research at broker XTB):
Brooks explains what’s happening here: “The bitcoin sell-off is also interesting because bitcoin and Nasdaq tend to move together and their positive correlation is 40%. This is a moderate positive correlation, however, the correlation between bitcoin and Bloomberg’s AI stock basket has a closer positive relationship, at 62%.
“This suggests that when Bitcoin moves, it impacts AI stocks. The reason is liquidity. In recent years, liquidity has flowed simultaneously between digital assets and advanced technology stocks. This means that the two asset classes share a close financial connection, which is affected by changes in liquidity patterns.”
“So when bitcoin strengthened, that flowed into AI stocks, and when the price of bitcoin falls, that downward pressure can weigh on tech stocks.”
But what about the Trump factor? I asked Brooks for his opinion: “I think the Trump family’s crypto interests are dirty, but I don’t think that’s the main reason investors have deserted crypto in recent months.
Billionaire Republican Party Donor Ken Griffin Slams Trump Administration for ‘Enriching’ His Family Members pic.twitter.com/xbz9zrRJAR
-Forbes (@Forbes) February 4, 2026
“I think Trump’s policies, his threats to take Greenland by force, abandon his allies, and threaten the independence of the Fed are actually hurting the crypto environment.
“Crypto still has very limited uses, so when the geopolitical outlook/order is upended by a US president with an America First agenda, that makes it even less attractive to hold.”
Brook then turned to what she sees as the technical factors at play: “Over the past few months, investors have been very wary of assets hitting record highs, crypto was the first asset whose valuations appeared stretched and investors sold their holdings, with few buyers to pick up the decline.
“This is currently happening with silver and, to a lesser extent, gold. So the sell-off of cryptocurrencies is part of a market-wide event, with traders and investors re-evaluating valuations and the level of risk they are willing to hold in richly valued assets.”
Bitcoin must hold above $58,000 and $60,000
At the end of the Asian session, Allen Ding, head of research at Hong Kong-licensed virtual asset manager Bitfire, issued a note describing the precarious state of the market heading into the weekend.
He believes that if Bitcoin does not hold $60,000 or $58,000, a deeper correction is expected.
“Technically, Bitcoin accelerated its decline after breaking through the key $74,000 support. While oversold conditions suggest a near-term rebound, the focus is on the weekly EMA240 and the $60,000 level as the next critical support,” explains Ding.
He concludes that we are seeing a erosion of sentiment support around high-risk assets. He comments: “A profound upheaval in global risk assets, with silver prices collapsing and Korean stocks falling alongside the Nasdaq.
“The Fed’s expectations have changed, causing a broad drawdown of risk assets, while Bitcoin ETFs have seen sustained outflows, Coinbase’s negative premium has widened, and institutional offerings have weakened.
A wave of leveraged Ethereum liquidation, amplified by scheduled stop-losses, triggered a cascade of selling.
Chart: Bitcoin/USD February 5 200-day SMA – Thanks to Kyle Rodda, Senior Financial Markets Analyst at Capital.com.
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Fed Worries About Shift, Citadal Securities Lifts Cover on Trump
Let’s leave aside the part Ding mentioned about the Fed’s choice: “Fed expectations have changed” might prove to be an understatement for this quarter. Kevin Warsh was on the list of likely contenders, but his selection nevertheless injected even more uncertainty into the macro environment.
Warsh was previously considered a hawk. So, if his “I’m a low rate fan” strategy of sympathizing with President Trump turns out to be thin and he starts chipping away at the Fed’s bloated balance sheet, that’s not accommodating for an expansionary scenario. Trump’s plan is to throw money at voters as the November midterm elections approach.
And that brings us back to the reverse Trump Midas touch that no one wants to talk about, or at least, not out loud.
One of my sources at Citadel Securities recently told me that bitterness is starting to emerge about the Trump administration. Citadel is one of Wall Street’s largest market makers and its boss, Ken Griffin, is a major Republican donor.
His company was behind the creation of EDX Markets in 2023 and then moved into crypto market making early last year, taking inspiration from the new administration’s professed crypto-friendliness.
Although Griffin believes Warsh will be a “solid” Fed pick that will put an end to concerns about the Fed’s independence, he’s not sure what the Trump White House is planning. According to Bloomberg, Griffin revealed his cover at a recent Wall Street Journal event:
Citadel’s Ken Griffin said the Trump administration’s tendency to reward loyalists doesn’t sit well with business executives and criticized the president’s desire to enrich his family while in office.
“Most CEOs don’t want to find themselves in a situation where they’re being fooled by one administration,” Griffin said in an interview Tuesday at a Wall Street Journal event. When the U.S. government “smacks of favoritism,” leaders fear winning or losing based on whether they publicly support the administration, he added.
At a minimum, the Trump family’s ‘dirty’ interests aren’t helping crypto
While Brooks doesn’t buy the idea that it’s all Trump’s fault, she agrees that the administration’s actions and the Trump family’s “dirty” dealings don’t help in the context of more consequential developments in the markets.
If there’s one description that, for many, sums up the Trump brand, it’s crooked, and the danger is that it will rub off on crypto.
Businesses need state structures that they can trust and that are fair and impartial when deciding between their competitors in the market. Crypto needs to rebuild trust in its narratives or establish use cases that achieve the same results. If crypto is seen as a way for the Trump family to enrich themselves at the expense primarily of retail investors, it will leave a bitter taste in the mouth.
The implementation of a CLARITY Act that really works for crypto and all market participants, along with the emergence of killer apps, Polymarket’s prediction market perhaps being the first, could start to change the game in a more positive direction for crypto.
In the meantime, leverage must be removed and market structure repaired, which in part requires Trump to calm down — earlier this week he remarked that he was “a big crypto enthusiast” — and for his crypto companies to disappear. Brutal, but here we are. Enough already.
After Bitcoin Price Crash – Is It All Donald Trump’s Fault? appeared first on 99Bitcoins.
