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Bitcoin recently hit a low of $76,600, raising concerns across the crypto community about its future trajectory. This decline briefly pushed the asset below its 200-day moving average, marking a significant shift from its record-breaking rally to an all-time high of $109,200. Over the past few weeks, Bitcoin has corrected by more than 25%, bringing its total market capitalization down to $1.53 trillion. While short-term factors such as stronger-than-expected CPI data, increased job availability in the US, and other macroeconomic developments have led to temporary relief rallies, Bitcoin has yet to regain its bullish momentum. Currently stabilizing near the $84,000 level, the key question remains—what factors could resume the bull run and push Bitcoin toward new all-time highs?How common are market corrections? During a bull run, consolidation phases such as this one are quite common. Over the last 10 years, we have seen over 11 instances where a 25%+ correction has occurred. When we look at the recent corrections in 2021 and 2017, the average correction was about 37% and 37%, respectively. Compared to the previous years, we are at a much better place for a recovery given that the perception of crypto has been changing across the world, starting from the US, China, the Middle East and many other emerging countries. What’s driving this correction?Trump’s tariff warAfter Bitcoin’s surge to an all-time high of $109,200, a period of consolidation was inevitable. However, the key catalyst behind the recent correction was President Trump’s decision to impose higher import tariffs on major economies, including Canada, Mexico, the EU, and China. While this move initially unsettled investors, prompting profit-taking across financial markets, the long-term implications could be more favorable for crypto.Historically, heightened tariffs have led to inflationary pressures and economic slowdowns, increasing demand for alternative stores of value. If trade tensions persist, investors—both retail and institutional—may seek refuge in assets like gold and Bitcoin, reinforcing crypto’s role as a hedge against economic uncertainty. A prolonged trade war could further accelerate Bitcoin’s adoption as a non-sovereign asset, potentially strengthening its position in global financial markets.Sell-Off from new investors and institutional investorsAnother key factor behind the recent downturn in the crypto market is panic selling by new investors who entered the space over the last three months. According to a report by 10x Research, nearly 70% of the current selling pressure in Bitcoin is coming from these recent entrants. As prices declined, fear-driven selling intensified, leading to further volatility.Additionally, institutional investors—who had been accumulating Bitcoin through ETFs over the past year—have also started offloading their holdings. Over the last five weeks, institutions have withdrawn approximately $5.4 billion from the market, redirecting capital toward safer assets like treasury yields amid rising uncertainty. However, institutional sentiment could shift with the introduction of the Strategic Bitcoin Reserve. As the reserve reinforces Bitcoin’s long-term credibility, we may see institutions transition from net sellers to net buyers in the months ahead, bringing renewed confidence to the market. Strategic Bitcoin reserveSomething that the entire crypto community was eagerly waiting for was the establishment of the Strategic Bitcoin Reserve. While Trump recently has announced the strategic reserve, a Reserve entirely made from seized assets, it did not please the investors as the US would not become a buyer of crypto, but a mere holder. However, a key provision in the executive order states that any BTC deposited in the reserve “shall not be sold” and will remain a part of the United States’ reserve assets. This effectively removes around 200,000 BTC worth nearly $17 billion from supply from circulation while positioning the US as a dominant force in the crypto market. Additionally, Bo Hines, Executive Director of the US President's Digital Assets Task Force, hinted that the White House intends to buy as much Bitcoin as possible, boosting investor confidence and increasing the odds of putting Bitcoin on a bullish trajectory. What should investors do? Market cycles are an inevitable part of every financial ecosystem, and crypto is no exception. The recent correction is a natural phase of the broader market trend, influenced by global economic shifts, policy changes, and investor sentiment. One of the most important steps investors must follow right now is setting clear financial goals and aligning investments with personal risk tolerance. Investors who establish a well-structured strategy can avoid emotional decision-making and take advantage of market pullbacks. Such corrections present an opportunity to deploy strategies like dollar-cost averaging (DCA), which allows investors to spread their purchases over time, generating better risk-adjusted returns in the long term. Additionally, diversification remains a key principle for managing risk. Allocating funds across different asset classes—such as equities, commodities, and crypto—can help balance exposure and improve portfolio resilience. (This article is attributed to Mr Edul Patel, Co-founder and CEO of Mudrex, a global crypto investing platform.)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)