Just over a month after hitting a record high, Bitcoin has erased gains of more than 30% since the start of the year, as enthusiasm for the pro -cryptocurrency stance of the Donald Trump administration has faded.
The largest cryptocurrency fell below $93,714 on Sunday, pushing the price to a level lower than the close recorded at the end of last year, when financial markets were booming after President Donald Trump's election victory.
Bitcoin had jumped to a record high of $126,251 on October 6, before beginning to decline just four days later, following Trump’s surprising comments about tariffs, which sent global markets into turmoil.
The currency pared its losses to trade at $94,869 by 8:39 a.m. Monday in Singapore.
Matthew Hogan, chief investment officer at Bitwise Asset Management in San Francisco, said: The market is generally in a risk-averse state. Cryptocurrencies were the alarm bell, and they were the first to fall.
The decline in major buyers is putting pressure on the market.
Over the past month, many major buyers, from index fund allocators to companies classified as currency custodians, quietly withdrew, depriving the market of the support flows that helped propel the currency to record highs earlier this year. Meanwhile, a slowdown in high-growth technology stocks has dampened overall risk appetite.
Over the course of the year, institutions formed the backbone of Bitcoin's legitimacy and price. Exchange-traded funds (ETFs) attracted more than $25 billion, according to Bloomberg data, bringing their assets to approximately $169 billion.
Stable flows helped reframe the currency as a portfolio diversification tool and a hedge against inflation, currency erosion, and political instability. However, this narrative, always fragile, is unraveling once again, exposing the market to a more tranquil but no less unsettling prospect: decoupling from this narrative.
Jake Keynes, senior analyst at Nansen, said the sell-off was the result of a combination of profit-taking by long holders, declining institutional flows, macroeconomic uncertainty, and the unwinding of debt-funded positions. What is clear is that the market has opted for a temporary downward trend after a prolonged period of stability.
Pressure is mounting on companies linked to Bitcoin.
The most prominent example of a halt in buying activity in the digital asset community comes from Michael Saylor’s Strategy&, a software company that has become a major Bitcoin investor.
Having once been a model for companies that pour bond money into cryptocurrencies, the company's stock is now approaching parity with the value of its Bitcoin holdings, an indication that investors are no longer willing to pay a premium for Saylor's debt-financed purchase model.
Boom and crash cycles have been a constant feature since Bitcoin entered the public consciousness after its surge of over 13,000% in 2017, before being followed by a drop of nearly 75% the following year.
Hogan, who sees the current pullback as a buying opportunity, said: The sentiment among retail investors in cryptocurrencies is extremely negative. They don't want to experience another 50% drop. People are preemptively exiting the market.
A psychological blow to major investors
Bitcoin, representing roughly 60% of the $3.2 trillion cryptocurrency market capitalization, has rattled investors throughout the year with its sharp fluctuations. It plummeted to $74,400 in April following Trump's tariff announcement, before surging to record highs and then falling again. One of the most recent shocks was Trump's surprise tariff announcement, which triggered record sell-offs on October 10.
Since then, the cryptocurrency market has struggled to recover. Chris Weston, head of research at Pepperstone Group, said the psychological damage suffered by traders in that crash is preventing major players from returning, and it will take time and sustained upward momentum for many to overcome this experience.
Smaller currencies have a greater impact
The market downturn hit smaller, less liquid cryptocurrencies harder, which traders tend to gravitate towards due to their higher volatility and typically strong performance during bull runs. The MarketVector Index, which tracks the bottom half of the top 100 digital assets, has fallen by about 60% this year.
Chris Newhouse, director of research at Ergonia, a company specializing in decentralized finance, said: Markets always have ups and downs, and market volatility in the crypto world is nothing new.
But among friends, in Telegram chats, and at conferences, the general impression I get reveals widespread skepticism about the injection of capital and the absence of natural upward catalysts.
