Within just a few weeks, Bitcoin dropped from 126,000 US dollars to 82,000 US dollars – a plunge of 35 percent. Fear still dominates the crypto market, and many investors are searching for explanations, especially since they were counting on the usual year-end rally.
“Whether Bitcoin will stabilize after this correction remains uncertain,” Deutsche Bank analysts told Decrypt. Unlike previous sell-offs, this year’s downturn has come in an environment of heavy institutional participation, political developments, and global macro headwinds.
Bitcoin is often promoted as a “defensive hedge” similar to gold or U.S. Treasuries, but the cryptocurrency is not yet living up fully to that role:
“Since October, BTC has been behaving more like a high-growth tech stock than an uncorrelated store of value.”
Overall, they name five key reasons for the BTC crash:
-
In recent weeks, Bitcoin has come under pressure from macroeconomic concerns, Donald Trump’s still-unpredictable trade war, and fears that AI stocks are overvalued.
-
The leading cryptocurrency typically performs best in a low-interest-rate environment. However, the U.S. Federal Reserve is sending mixed signals about a possible third rate cut in December, which is weighing on BTC.
-
Although the GENIUS Act, a stablecoin bill, was successfully passed earlier this year, the CLARITY Act – a key market-structure bill – has been stuck for months. This could slow further Bitcoin adoption.
-
After the record liquidation day on October 10, with 19 billion U.S. dollars wiped out, institutional investors have increasingly been pulling back from the crypto market. Falling liquidity makes a sustainable Bitcoin recovery harder.
-
After Bitcoin climbed above 126,000 U.S. dollars last month, long-term investors started taking profits and sold around 800,000 BTC. This is the largest wave of profit-taking of its kind since January 2024.