BitMEX founder Arthur Hayes predicted that Bitcoin could see a drop to $78,000, and breaking this support level could extend its slides to $75,000. According to Hayes, if the price of Bitcoin drops into the $70,000-$75,000 range, it will trigger big price swings due to high open interest at this range.

The total crypto market capitalization sank 6.7% to $2.7 trillion. With selling pressure across risk assets, BTC prices could be going much lower.

Bitcoin started the new week with increased volatility. After dropping to $80,000 on Sunday, the flagship cryptocurrency surged to above $82,000 in the early hours of Monday, according to CoinGecko data.

https://twitter.com/CryptoHayes/status/1898867933679616103

Markets Under Pressure

Over the past seven days, BTC has seen a 12% decline, and is currently trading 24% away from its all-time high. It may fall further in H1 2025.

The bearish trend has continued after the US Strategic Bitcoin Reserve and digital asset summit failed to boost the overall market sentiment. The reserve, established through President Trump’s executive order on March 6, would only be funded through confiscated assets from criminal and civil forfeitures for now.

The lack of immediate government purchases dashed hope for fresh institutional demand. Many investors who previously expected that the U.S. would actively purchase Bitcoin to bolster the reserve expressed disappointment.

Even with the order’s authorization of “budget-neutral” strategies for future Bitcoin acquisitions, the current absence of a detailed roadmap fueled market uncertainty.

Despite signaling the U.S. government’s growing recognition of the crypto industry, the White House Crypto Summit, which followed the executive order, received mixed reactions from the crypto community.

Coin Bureau’s co-founder Nic Puckrin said that the event did not come up with any major, market-moving news or policy changes. There is a shared thought that the crypto summit was likely a typical “sell the news” event.

Macroeconomic Pressures and Escalating Trade War

Elsewhere, ongoing trade tensions between the U.S. and key trading partners, including China and Canada, show no sign of cooling off.

Earlier this month, the U.S. started imposing a 25% tariff on most imports from Canada and Mexico, while increasing tariffs on Chinese imports to 20%. The U.S. has maintained its stance on tariffs as a tool to address trade deficits and security concerns.

Canada responded with 25% tariffs on $30 billion worth of U.S. goods, planning to expand these to $155 billion if Trump’s tariffs persist. China also retaliated with tariffs up to 15% on U.S. agricultural products.

Economists warn about escalating inflation due to Trump’s tariff policies. Morgan Stanley predicts inflation to rise to 2.5%, while Goldman Sachs forecasts core PCE inflation could reach 3%.

Trump claims tariffs and rate cuts go hand in hand, but economists argue tariffs exacerbate inflation, thus making rate cuts harder.

With inflation already sticky, the Fed has signaled it may cut rates only once in 2025, upending earlier expectations of two cuts.

Fed Chair Jerome Powell said last week that the central bank was in no rush to cut interest rates. The Fed will wait for more clarity on the impact of the Trump administration’s economic policies before making any monetary adjustments.

Increased inflation could reduce investor appetite for speculative assets like crypto. In recent weeks, Bitcoin’s price movements mirrored equity and stock markets, which fell as tariffs stoked growth fears.

Analysts also warn about potential recession driven by Trump’s policies, which would limit optimism about the Bitcoin reserve’s long-term impact. However, inflation will likely drive assets higher in coming years.

Trump has declined to rule out the possibility of a recession in 2025. Speaking with Fox News on Sunday, the President said that the economy is in a “period of transition,” and his policies, such as tariffs, are aimed at restructuring the U.S. economy. He believes these changes will ultimately benefit the country.