Crypto Chaos Unleashed: $1.5B Bybit Hack, Meme Coin Meltdowns, and AI Shockwaves Crash Bitcoin Below $80K

John Deacon

Feb 28, 2025

Key Points

  • Research suggests the crypto market downturn, especially for Bitcoin, is driven by multiple factors, including regulatory uncertainty and major security breaches.
  • It seems likely that the Bybit hack and collapses of high-profile meme coins, like those linked to Trump and Milei, have significantly eroded investor trust.
  • The evidence leans toward macroeconomic pressures, such as the Federal Reserve's cautious interest rate policy, and the DeepSeek AI breakthrough contributing to a risk-off market sentiment.

A realistic digital artwork depicting a financial crisis in the cryptocurrency market. The image features Bitcoin and other cryptocurrency logos sinking into a stormy ocean, with dramatic dark clouds overhead. A large shadowy figure representing regulatory uncertainty looms in the distance. Lightning strikes illuminate key crisis points such as the Bybit hack and meme coin crashes. In the foreground, financial charts and graphs are disintegrating into the wind, symbolizing market volatility and panic.

Overview

The cryptocurrency market, particularly Bitcoin, has experienced a notable downturn as of February 28, 2025. This decline is influenced by a mix of regulatory, security, and economic factors, each contributing to investor uncertainty and market volatility. Below, we break down the key drivers and provide context for understanding this complex situation.


Regulatory Uncertainty

Despite the U.S. administration's pro-crypto stance, delays in implementing clear regulations have created uncertainty. This lack of clarity has made investors cautious, impacting market confidence and contributing to the downturn Economic Times.


Major Security Breach

A significant event was the Bybit hack on February 21, 2025, where hackers stole $1.4 billion, marking the largest crypto theft ever. This breach triggered a market-wide sell-off, as it raised concerns about the security of centralized exchanges AMBCrypto.


Meme Coin Collapses

The collapse of meme coins associated with high-profile figures, such as Donald Trump and Javier Milei, has further destabilized the market. Trump's meme coin, launched in January, saw a rapid rise and subsequent crash, while Milei's $LIBRA coin, promoted in mid-February, surged and then plummeted, leading to significant investor losses and eroding trust CryptoTicker, Hindustan Times.


Macroeconomic Pressures

Macroeconomic factors, including persistent inflation and the Federal Reserve's cautious approach to interest rate cuts, have contributed to a risk-off sentiment. The Fed held rates steady in January 2025 and projected only two cuts for the year, impacting investor behavior in volatile assets like crypto Federal Reserve.


Unexpected Influence: AI Breakthrough

An unexpected factor is the DeepSeek AI breakthrough, a low-cost, high-performance AI model released in January 2025. This event triggered a sell-off in tech stocks, which spilled over into the crypto market, adding to the downturn by amplifying global market uncertainty CoinMarketCap.

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