Just over a month after reaching its all-time high, Bitcoin has erased more than 30% of its gains since the beginning of the year, as the frenzy over the Trump administration's support for cryptocurrencies is fading.
The mainstream cryptocurrencies fell below the $93,714 level on Sunday, causing their prices to drop below the closing price reached at the end of last year. At that time, as Donald Trump was elected president, the financial markets were continuing to rise. Bitcoin soared to a record high of $126,251 on October 6th, but just four days later, it began to fall sharply because Trump's unexpected remarks on tariffs caused global financial markets to become chaotic.
The token pared losses to trade at $94,869 as of 8:39 a.m. on Monday in Singapore.
“The general market is risk-off,” said Matthew Hougan, the San Francisco-based chief investment officer for Bitwise Asset Management. “Crypto was the canary in the coal mine for that, it was the first to flinch.”
Over the past month, many of the biggest buyers — from exchange-traded fund allocators to corporate treasuries — have quietly stepped back, depriving the market of the flow-driven support that helped propel the token to records earlier this year. At the same time, the recent cooling of high-flying technology stocks has led to a drop in overall risk appetite.
For much of the year, institutions were the backbone of Bitcoin’s legitimacy and its price. ETFs as a cohort took in more than $25 billion, according to data compiled by Bloomberg, pushing assets as high as roughly $169 billion. Their steady allocation flows helped reframe the asset as a portfolio diversifier — a hedge against inflation, monetary debasement and political disarray. But that narrative — always tenuous — is fraying afresh, leaving the market exposed to something quieter but no less destabilizing: disengagement.
“The selloff is a confluence of profit-taking by LTHs, institutional outflows, macro uncertainty, and leveraged longs getting wiped out,” said Jake Kennis, senior research analyst at Nansen. “What is clear is that the market has temporarily chosen a downward direction after a long period of consolidation/ranging.”
One of the starkest examples of a buying strike in the digital-asset community comes from Michael Saylor’s Strategy Inc., the software firm turned Bitcoin hoarder. Once the poster child for corporate treasury crypto plays, its stock is now flirting near parity to its Bitcoin stash — a sign that investors are no longer willing to pay a premium for Saylor’s high-conviction leverage model.
Boom and bust cycles have been a constant since Bitcoin burst into the mainstream consciousness with a more than 13,000% surge in 2017, only to be followed by a plunge of almost 75% the following year.
“The sentiment in crypto retail is pretty negative,” said Hougan, who sees the current pullback as a buying opportunity. “They don’t want to live through another 50% pullback. People are front-running that by stepping out of the market.”
Bitcoin, which accounts for almost 60% of crypto’s roughly $3.2 trillion in market value, has whipsawed investors throughout the year. Its price dropped to a low of $74,400 in April, when Trump announced his tariff policy. Subsequently, before the latest round of decline, the price of Bitcoin reached a new high. The most recent major fluctuation was when Trump suddenly announced the imposition of tariffs on October 10th, triggering a record-breaking sell-off.
Bitcoin and the wider crypto market has struggled to recover since. The damage done to traders’ psyche in that selloff “is still holding the big players back and it will take time and a consistent push higher for many to forgive and forget,” said Chris Weston, head of research for Pepperstone Group.
The market downturn has a more severe impact on smaller and less liquid tokens, which are often favored by traders due to their higher volatility and better performance during market rallies. The MarketVector index, which tracks the bottom half of the top 100 digital assets, has dropped by approximately 60% this year.
“The markets are always an ebb and flow, and cyclicality in crypto is nothing new,” said Chris Newhouse, director of research at Ergonia, a firm specializing in decentralized finance. But “amongst friends, Telegram chats, and at conferences, the general sentiment I’ve received shows skepticism around capital deployment, and no natural bullish catalysts.”
Comments