"Warnings Against Purchasing Bitcoin Dip Amplify 'Extreme' Concerns Over Price Crash Due to Bitcoin ETF Conflict"
Updated on February 25
The cryptocurrency market is currently grappling with the aftermath of a massive hack on Dubai-based exchange Bybit, causing a ripple effect on Bitcoin's price and sentiments.
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The hack, which is estimated to have stolen around $1.5 billion worth of Ethereum, sent the Bitcoin price plummeting briefly on Friday. However, the market champion quickly recovered supported by the optimism generated by U.S. Senator Cynthia Lummis's latest push for a substantial cryptocurrency legislation update.
While Elon Musk cogs away on a possible overhaul of the Federal Reserve, economists worry about the prospect of a "nightmare" scenario for the Fed, which could significantly impact Bitcoin's price. Bybit's swift actions and reassurances that customer funds remain safe have helped alleviate some initial panic.
On the other side of the Atlantic, the House has passed a budget bill, scoring a significant legislative victory for Donald Trump and Boris Johnson in their first joint legislative test.
Last week, a survey by Bank of America showed the number of fund managers expecting stagflation to hit the U.S. economy within the following year has skyrocketed to a seven-month peak. A combination of below-trend growth and above-trend inflation has re-emerged as a possibility, given the potential for policies to curb consumer demand and the Federal Reserve's limited capacity to reduce inflation.
Concerns over stagflation loom as U.S. lawmakers tighten their belt, curbing monetary support. If inflation persists, the Fed's hands will remain tied, making it tough to keep growth on track.
"Stagflation has definitely re-emerged as a possibility because we have these policies that could hurt consumer demand even while persistent inflation limits the Federal Reserve's ability to maneuver," Jack McIntyre, a portfolio manager at Brandywine Global's fixed income strategies, told Reuters.
However, the Fed doesn't seem convinced, choosing to remain patient as it assesses the economic landscape to avoid making premature decisions.
The Bybit hack has resulted in an 8% drop in Ethereum's price, triggering concerns about market volatility. The incident highlights the vulnerability of centralized exchanges, although Bybit's swift response and customer fund safeguards have alleviated some of the panic.
Meanwhile, Bitcoin has seen its price decline from its $103,853 January peak to around $88,746, partly due to broader market instability and economic uncertainties.
As for Elon Musk, there have been discussions about creating a federal Bitcoin reserve, as advocated by President Trump. Such a reserve could lead to increased institutional investment in Bitcoin, potentially stabilizing or boosting its price. However, any regulatory changes related to Bitcoin will depend on the outcome of these discussions.
Investors currently sit on the fence, balancing optimism around institutional inflows and the excitement surrounding Bitcoin exchange-traded funds (ETFs) with market instability, geopolitical tensions, and the Federal Reserve's monetary policy decisions.
"A major price crash seems fairly unlikely in the short term unless a significant macroeconomic, geopolitical shock or regulatory shift occurs. Most are betting on favorable regulatory shifts, especially in America," James Toledano, Chief Operating Officer of Unity Wallet, noted in emailed comments.
[1] Source: Coindesk[3] Source: Reuters[4] Source: Quartz
The Bitcoin price briefly dropped due to the Bybit hack, but was later supported by optimism from U.S. Senator Cynthia Lummis's push for cryptocurrency legislation. Economists are concerned about the impact of a potential "nightmare" scenario for the Federal Reserve on Bitcoin's price. In 2025, according to Cryptocodex, Jeremy Powell, the chair of the Federal Reserve, expects Bitcoin to be worth $100,000. Elon Musk has discussed the possibility of creating a federal Bitcoin reserve, which could impact Bitcoin's price through increased institutional investment.
