Bitcoin fell sharply after a sell-off of major U.S. stock indices. Bitcoin has been correlated closely to the price movement of the Nasdaq index.

Luke MacGregor  | Bloomberg | Getty Images

Bitcoin has fallen through the $90,000 level, weakened by sell pressure in equities as the crypto market awaits its next catalyst.

The price of bitcoin was last lower by 7% at $87,220, according to Coin Metrics. Earlier, it slid as low as $85,899.99, its lowest level since November.

Tuesday's decline puts the blue chip coin about 20% off its all-time high reached on President Donald Trump's inauguration day.

"Equities have faced a few difficult sessions over the last week, with top-performing stocks down many times the index, as markets grapple with increased uncertainty under the new administration," said Steven Lubka, head of private clients and family offices at Swan Bitcoin. "This pressure has spilled over into bitcoin and crypto markets."

The S&P 500 on Monday posted a three-day losing streak as it failed to recover from last week's sell-off, driven by concern over a slowing economy and sticky inflation.

"Ultimately, the lack of visible short-term catalysts and pressure from equities creates an environment for profit-taking and pressure from shorts," Lubka added.

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Bitcoin falls below the key $90,000 level Tuesday

Bitcoin's descent triggered a wave of long liquidations, which forces traders to sell their assets at market price to settle their debts. Centralized exchanged have seen $614.5 million in long liquidations in the past 24 hours, according to CoinGlass.

Bitcoin kicked off the year in rally mode, fueled by optimism about the positive changes the new Trump administration was expected to make for the crypto industry. However, since the President issued his widely anticipated executive order on crypto at the end of January – the contents of which were well received by the industry despite its tamer than hoped for language on a strategic bitcoin reserve – the market has had little to look forward to.

While optimism about the long-term positive impact Trump's policies could have for crypto remains high, bitcoin's movements have been and may continue to be dictated by macroeconomic trends.

"From November through January, the market was very enthusiastic about pricing in a crypto-friendly U.S. administration," said Joel Kruger, market strategist at LMAX Group. "Now it's a question of waiting for that next catalyst. We know that all of this is in place, and the market is in a bit of a sell-the-fact consolidation sell as it kind of waits."

The $90,000 level marks the bottom of the narrow range bitcoin has been trading in since the end of November. Analysts have warned that if bitcoin were to meaningfully break below the level, it could see a deeper pullback toward $80,000.

"There is room for bitcoin still to go back down towards the $70,000 to $75,000 area without doing anything to compromise the outlook," Kruger said, "and we suspect that there will be plenty of demand as we head down towards those levels."

Lubka said he believes bitcoin will finish digesting this move and resume its long-term move higher by mid-March.

Other cryptocurrencies fared worse on Monday. Ether and Solana's sol token each tumbled 8%.

The meme coin sector was down 15.5% in the past 24 hours, according to CoinGecko. Libra, which caught attention last week after Argentine President Javier Milei briefly promoted it, tumbled 23% in the same period. The Trump meme coin slid 13%.

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