Eric Trump, son of former US President Donald Trump, urged his X followers to “buy the dip” when Bitcoin fell below $90,000 on February 25. He posted a short message “₿uy the dips” accompanied by the Bitcoin symbol, sparking a heated debate in the crypto community about investment strategies amid market volatility.

However, not everyone agrees with this view. Some investors warn that Bitcoin’s decline could be linked to broader economic concerns, especially new US trade policies. One user responded: “This is not a normal dip, but the result of trade wars and tariffs.”

Market Sentiment: Fear and Greed Index Hits Extreme Levels

The Bitcoin Fear and Greed Index, a popular gauge of market sentiment, has dropped to 25, putting the market in a state of “extreme fear.” This is a sign that many investors are concerned about Bitcoin’s next move.

Bitcoin recently hit an all-time high of $109,000, but has lost nearly 20% of its value since then. The decline coincided with Donald Trump reaffirming plans to impose new tariffs on Canada and Mexico, raising concerns about the negative impact on the global economy.

Trump’s Cryptocurrency Policy Under Close Scrutiny

While Trump has positioned himself as a crypto advocate, his administration is facing pressure to establish a clear regulatory framework. Last month, Trump signed an executive order establishing a task force to study cryptocurrency regulations. The task force aims to propose regulatory reforms, protect investors, and assess the possibility of establishing a unified federal framework for cryptocurrencies.

However, some industry experts remain skeptical about the pace of implementation of these policies. Regulatory concerns about stablecoins, decentralized finance (DeFi), and environmental issues related to Bitcoin mining have yet to be fully resolved.

History Shows Bitcoin Can Rebound After Fear Index Bottoms

Historical data from Glassnode shows that Bitcoin typically recovers strongly after the Fear and Greed Index drops below 30. Specifically, in previous cycles, Bitcoin has typically returned an average of more than 50% within 6 months of hitting extreme fear levels.

A prime example is the 2018-2019 period, when Bitcoin recovered more than 300% after a long period of market fear. However, experts also warn that past performance does not guarantee future results, especially when the global economy is still facing many uncertainties.

How Does the Trade War Affect Cryptocurrencies?

Trade conflicts and tariffs have a two-way impact on the cryptocurrency market. On the one hand, economic uncertainty often boosts demand for Bitcoin as a safe-haven asset. On the other hand, tariffs and trade tensions can reduce investment in the cryptocurrency market.

Research by the International Monetary Fund (IMF) suggests that trade tensions can increase the use of cryptocurrencies in affected regions, as businesses look for alternative payment methods. However, if the trade war drags on, the downward pressure on Bitcoin could increase due to a decline in market liquidity.

Comparing Bitcoin's Current Volatility to Previous Cycles

Despite the volatility in Bitcoin's price over the past few days, data from Coin Metrics shows that the current volatility is still lower than in previous bull cycles. During the bull markets of 2017 and 2021, Bitcoin's 30-day volatility index often exceeded 100. Currently, it is still below 80, indicating that the market is gradually maturing with the increasing participation of large institutions.

Compared to traditional assets such as the S&P 500 (which has an average volatility of 10-20), Bitcoin still has significantly higher volatility. However, the recent decline in volatility could signal increasing stability in the cryptocurrency market.

Conclusion: Opportunity or Risk in Bitcoin Price Drop?

Eric Trump’s advice to “buy the dip” reflects a popular strategy in the cryptocurrency market, but it is not always appropriate for all investors. While history shows that sharp drops are often opportunities to accumulate, macroeconomic factors such as trade wars and US cryptocurrency policy still play an important role in determining the upcoming market trend.

Investors need to consider the risks and closely monitor global political and economic developments before deciding whether Bitcoin is truly an attractive investment at this time.