Bitcoin bows into the weekend following tensions from Trump-Zelensky meeting

US President Donald Trump met with Ukrainian President Volodymyr Zelensky on Friday to discuss potential solutions for ending Ukraine's war with Russia.

The fallout from the discussion immediately impacted the crypto markets, with Bitcoin (BTC) failing to recover the $85,000 level at press time.

Trump-Zelensky meeting sparks tension in Bitcoin and stock markets

A heated argument broke out in the Oval Office on Friday as President Donald Trump and Ukrainian President Volodymyr Zelensky meeting ended in war of words over the Ukraine-Russia war.

Trump and Vice President JD Vance confronted Zelensky over his attitude at the Oval Office toward US aid in the war.

Following the meeting, investment markets experienced a further drawdown. Bitcoin remained range-bound, trading slightly above $84,000 at press time.

Stock markets are displaying similar patterns. The S&P 500 and Nasdaq-100 have fallen 200 and 1,200 points below their all-time highs, respectively.

This highlights the growing correlation between cryptocurrencies and traditional stocks.

While the recent sell-offs were majorly sparked by Trump's tariff threats on international trading partners, hedge funds have played a key role in exacerbating the decline.

A crypto finance platform Matrixport report suggests that these firms have been unwinding their Bitcoin basis trades due to low profitability since risk-off sentiment started rising in the market.

"With yield opportunities declining significantly since the December FOMC meeting, and trading volumes dropping in its aftermath, it's no surprise that hedge funds are unwinding their arbitrage positions. This is evident in the record outflows from Bitcoin ETFs, as these funds exit trades that are no longer as profitable." wrote Matrixport analysts.

"These hedge funds collectively hold $10 billion in Bitcoin ETFs, and with total inflows reaching $39 billion, this suggests that at least 25% of Bitcoin ETF capital is tied to arbitrage trades," they added.

Despite the downturn, MEXC Chief Operating Officer Tracy Jin believes the current correction is a necessary and healthy phase within a broader bull market cycle.

"The current drawdown is a healthy risk release within a bull market. After initial adjustments in altcoins and Bitcoin, US stocks are expected to experience similar corrections," Jin stated.

Looking ahead, Jin expressed optimism toward market conditions in 2025, stating that the recent drawdown mirrors that of May 2021.

"The current decline rhythm is similar to the market situation around May 2021. At that time, after a continuous rise, the market experienced a rapid pullback, forming a "major correction" scenario. This time, the drawdown might clear out short-term speculative funds, paving the way for a subsequent rebound," Jin added.