Bitcoin is on track for its fourth annual decline in history, but the first not linked to a major scandal or a complete collapse within the cryptocurrency industry. This decline comes at a time when the market is supposedly more mature and regulated than in previous cycles.
The latest downward trend occurred on Monday, when Bitcoin experienced a sharp sell-off that sent it tumbling as much as 3.7% during New York trading. This brings the cryptocurrency down about 7% since the start of the year, while it was trading at around $87,000 at 11:00 AM Riyadh time on Wednesday.
Although this correction appears less severe than the previous three years, which saw annual losses, its timing is surprising, as it comes in a completely different environment characterized by widespread institutional adoption, evolving regulatory frameworks, and unprecedented political support from US President Donald Trump.
Loss of momentum after the historic summit
Since Bitcoin hit a record high above $126,000 in early October, the market has been in turmoil, unsettling even the most optimistic and leaving digital assets constantly searching for a foothold. Trading volumes have noticeably declined, investors have begun withdrawing funds from Bitcoin-linked exchange-traded funds (ETFs), and derivatives markets have shown a weakening appetite for betting on a near-term recovery.
Even massive purchases by one of the market's biggest whales, represented by Strategy& led by Michael Saylor, weren't enough to change the overall trend. Prateek Kalla, a portfolio manager at Apollo Crypto, noted that most investors were surprised that the numerous positive catalysts hadn't translated into actual price increases.
Conversely, the market's downward trend has decoupled Bitcoin from US stocks. While the S&P 500 has reached record highs and gained approximately 16% since the beginning of the year, and technology stocks have continued to outperform, Bitcoin has failed to keep pace.
Lessons from past collapses
Since its launch on exchanges in 2010, Bitcoin has experienced three major annual losses, all linked to events that directly shook market confidence. In 2014, the hack and collapse of the Mt. Gox exchange exposed deep vulnerabilities in the nascent cryptocurrency infrastructure, demonstrating to early investors that their funds were not necessarily safe on centralized platforms, leading to a roughly 58% drop in the currency's value that year.
Four years later, the initial coin offering (ICO) bubble burst following stricter regulatory measures, sending Bitcoin and other cryptocurrencies into a sharp downward spiral. The 74% decline in 2018 remains the largest in the cryptocurrency's history to date.
The 2022 crash was the most impactful in terms of repercussions, not only because of the inflated market size at the time, but also as a result of the collapse of major companies, most notably the FTX platform led by Sam Bankman Fried, and the subsequent strict regulatory campaign under the Joe Biden administration.
Time correction instead of price collapse
Maxime Zeiler, CEO of STS Digital, believes the current cycle may end as a temporary correction rather than a sharp price collapse. According to this view, Bitcoin could enter a prolonged period of consolidation, with prices fluctuating between $70,000 and $100,000.
Up until the October peak, the picture suggested that Bitcoin's rise was unstoppable. Trump had declared cryptocurrencies a national priority, the US Congress had passed pivotal legislation concerning stablecoins, Bitcoin exchange-traded funds attracted billions of dollars, acquisition deals and funding rounds soared, and enforcement cases opened under the previous administration receded.
But behind this momentum, weaknesses were accumulating, chief among them excessive leverage. This fragility exploded into the open on October 10, when $19 billion in leveraged positions were liquidated, plunging cryptocurrency markets into sharp turmoil.
Liquidity withdrawal and whale pressure
Following the liquidation wave, large Bitcoin holders began selling, keeping prices under pressure even after most leverage had exited the market. According to CoinDesk data, trading volumes in November saw their largest monthly decline since the beginning of 2024.
Multiple indicators suggest that traders are currently preferring to remain on the sidelines. Investors have withdrawn more than $5.2 billion from US-listed Bitcoin spot funds since October 10, and market depth, which measures the market's ability to absorb large trades without sharp fluctuations, has fallen by about 30% compared to its peak this year, according to data from Caico.
According to Kalla, the selling off by old whales played a crucial role in weakening the momentum, noting that the industry got everything it asked for on the regulatory front, including index funds with advanced features, but prices did not respond as expected.
