Bitcoin (BTC) has fallen below the $90,000 mark amid weakening institutional demand and a wave of legislative setbacks across the United States. On Tuesday, BTC dropped to $88,042—a decline of 8% over the past 24 hours—while Ethereum (ETH) slid 11.8% to $2,372.97. The downturn follows multiple factors, including hedge fund profit-taking and diminishing momentum in state-level efforts to adopt cryptocurrencies into public reserves.
Legislative Setbacks in Five U.S. States
Efforts to establish state-backed cryptocurrency reserve funds have hit a roadblock, with five U.S. states—North Dakota, Pennsylvania, South Dakota, Wyoming, and most recently, Montana—rejecting proposals to hold Bitcoin as part of their treasury assets.
Montana’s House of Representatives voted down a bill that would have created a special revenue account allowing the state’s investment board to allocate funds into precious metals and Bitcoin. Notably, 16 Republican lawmakers switched positions during the final vote, contributing to the proposal's failure.
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This growing resistance could signal broader challenges for pro-crypto legislation at both state and federal levels. With increasing scrutiny and inconsistent support across party lines, the vision of integrating Bitcoin into government balance sheets faces significant headwinds.
Utah Leads the Charge with Active Crypto Legislation
Despite these setbacks, progress is not entirely stalled. Utah currently stands at the forefront of crypto-friendly policy innovation. Its Blockchain and Digital Innovation Enhancement Act has successfully passed the state House and is now undergoing second reading in the Senate.
If enacted, the law would position Utah as a pioneer in digital asset regulation by creating a legal framework for blockchain-based financial instruments and exploring strategic investments in digital currencies. The bill reflects a more measured and structured approach compared to outright reserve proposals, potentially serving as a model for other states.
This legislative momentum underscores a critical divide: while some states retreat due to fiscal caution or political opposition, others see long-term strategic value in embracing digital assets.
Hedge Fund Arbitrage Unwinds Amid Market Volatility
Another key driver behind Bitcoin’s recent price drop is the unwinding of arbitrage positions by hedge funds. Arthur Hayes, co-founder of BitMEX, explained on X (formerly Twitter) that many funds had been exploiting price differences between spot and futures markets.
Specifically, hedge funds were buying shares of the iShares Bitcoin Trust ETF (IBIT) while simultaneously shorting CME Bitcoin futures contracts. This strategy allowed them to profit from the premium between the two instruments.
However, as Bitcoin’s price declined and the spread narrowed, these trades became less profitable. As a result, funds began closing their positions—selling IBIT shares and buying back CME futures—adding downward pressure on BTC.
Hayes predicts this trend will continue during U.S. trading hours, potentially pushing Bitcoin toward $70,000 if macroeconomic conditions worsen or institutional selling accelerates.
Declining Institutional Demand and Market Leverage
Beyond technical trading strategies, broader market indicators suggest weakening institutional interest. According to a recent report from Bitfinex, reduced risk appetite and macroeconomic uncertainty are dampening Bitcoin’s momentum.
The report highlights Bitcoin’s growing correlation with traditional financial markets. With the S&P 500 struggling to sustain levels above 6,000 points, investor sentiment has turned cautious—particularly toward high-risk assets like cryptocurrencies.
Moreover, leveraged trading activity has hit yearly lows. Both Bitcoin and Ethereum open interest—the total number of outstanding derivative contracts—have declined significantly. This contraction signals a shrinking market footprint and reduced speculative activity.
Bitfinex interprets this as evidence of an “overall market contraction,” where investors are either exiting positions or avoiding new entries amid uncertainty.
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CZ Reveals Personal Crypto Holdings
In a separate development, Binance founder Changpeng Zhao (CZ) shared insights into his personal investment portfolio. His allocation reveals a strong preference for BNB—the native token of Binance—with it making up 98.48% of his holdings.
Bitcoin accounts for only 1.32%, followed by EURI (a Euro-pegged stablecoin) at 0.17%, and USDT at 0.03%. While not representative of broader market trends, CZ’s portfolio reflects confidence in Binance’s ecosystem and a relatively conservative stance on major cryptocurrencies like BTC.
Core Keywords:
- Bitcoin price drop
- U.S. crypto legislation
- Bitcoin below $90K
- institutional crypto demand
- hedge fund crypto trading
- Bitcoin ETF arbitrage
- cryptocurrency market contraction
Frequently Asked Questions (FAQ)
Q: Why did Bitcoin fall below $90,000?
A: Multiple factors contributed to the drop, including profit-taking by hedge funds using ETF-futures arbitrage, declining institutional demand, and negative sentiment following state-level rejections of Bitcoin reserve proposals.
Q: Which U.S. states rejected Bitcoin reserve funds?
A: North Dakota, Pennsylvania, South Dakota, Wyoming, and Montana have all voted against legislation that would allow state investment in Bitcoin as part of public reserves.
Q: Is any U.S. state still advancing crypto legislation?
A: Yes—Utah’s Blockchain and Digital Innovation Enhancement Act has passed its House and is now under review in the Senate, positioning the state as a leader in responsible crypto policy development.
Q: How are hedge funds affecting Bitcoin’s price?
A: Some funds profited from price differences between spot ETFs like IBIT and CME futures. As spreads narrowed due to falling prices, they unwound positions—selling ETFs and covering shorts—adding selling pressure on BTC.
Q: What does low open interest mean for crypto markets?
A: Declining open interest in BTC and ETH futures suggests reduced leverage use and lower speculative activity, often indicating market caution or contraction ahead of major moves.
Q: Could Bitcoin drop to $70,000?
A: Analysts like Arthur Hayes suggest it’s possible if current trends continue—especially if institutional outflows persist and macroeconomic conditions deteriorate further.
While short-term volatility shakes investor confidence, the long-term trajectory of cryptocurrency adoption remains tied to regulatory clarity and institutional participation. As legislative battles unfold and market dynamics shift, staying informed is crucial for navigating this evolving landscape.
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