Bitcoin has recently experienced a significant downturn, erasing more than 30% of its gains from earlier in the year, following its all-time high in early October. The dominant cryptocurrency dipped below $93,714 on Sunday, falling below the closing levels from the end of the previous year, when optimism surged after President Donald Trump’s election.
After peaking at a record $126,251 on October 6, Bitcoin’s price began to decline just a few days later, exacerbated by unexpected remarks from Trump regarding tariffs, which triggered a global market sell-off. As of 8:39 a.m. Monday in Singapore, the cryptocurrency was slightly recovering, trading at $94,869.
Market analysts suggest a “risk-off” sentiment has taken hold, with Matthew Hougan of Bitwise Asset Management noting that Bitcoin often foreshadows broader market trends. The withdrawal of major buyers, such as exchange-traded fund (ETF) allocators and corporate treasuries, has led to a decline in market support that previously helped drive Bitcoin’s ascension.
Throughout the year, institutional investment provided significant backing for Bitcoin, with ETFs attracting over $25 billion, consequently boosting total assets to approximately $169 billion. This steady influx helped to position Bitcoin as a viable portfolio diversifier amidst inflation concerns and economic instability. However, that support seems to be waning, leaving the market vulnerable.
Jake Kennis from Nansen highlighted a mix of factors contributing to the current selloff: profit-taking by long-term holders, institutional outflows, macroeconomic uncertainties, and leveraged positions being liquidated. “The market has temporarily chosen a downward direction after a long period of consolidation,” Kennis stated.
One notable example of the declining appetite for Bitcoin comes from Michael Saylor’s Strategy Inc., which has shifted from software to a heavy Bitcoin investment. The firm’s stock is now nearing parity with its Bitcoin holdings, indicating investor reluctance to continue valuing Saylor’s aggressive strategy at a premium.
The volatility of Bitcoin has been a hallmark since its meteoric rise and fall around 2017. Currently, public sentiment in the crypto retail space appears predominantly negative, with many investors reluctant to endure further losses. Hougan suggests this pullback may present a buying opportunity but acknowledges that the fear of another major downturn is prompting many to exit the market.
Having previously dropped to as low as $74,400 in April following Trump’s tariff implications, Bitcoin’s fluctuations reflect the broader market dynamics. Following a surprise tariff announcement on October 10, there was significant liquidation, and the crypto market has struggled to recover ever since. The psychological toll of this selloff continues to impact trading decisions.
Smaller, less liquid cryptocurrencies have been hit even harder, as indicated by the 60% decline in a MarketVector index tracking the lower half of the largest 100 digital assets this year. Chris Newhouse from Ergonia noted the cyclical nature of the crypto market but highlighted prevailing skepticism regarding new investments and a lack of strong bullish indicators.
Overall, the market is navigating a challenging landscape, with diminishing institutional involvement casting doubt on Bitcoin’s future trajectory.
