It took just over a month for the cryptocurrency to wipe out nearly all of its market capitalization gains so far this year. The total market capitalization of all cryptocurrencies peaked at nearly $4.4 trillion on Oct. 6, but has since fallen 20%, leaving the asset class up just 2.5% this year, according to CoinGecko. The sudden liquidation of about $19 billion in leveraged positions just days after hitting record highs shattered confidence and left traders with few signs of betting on a rebound.
In a year when regulators, global banks and institutional investors have become more favorable towards digital assets, this performance is astonishing and few could have predicted it.
President Donald Trump's push to make the United States the world's cryptocurrency hub has sparked a wave of market activity that has pushed Bitcoin prices up as much as 35%. However, market sentiment has reversed so quickly that digital assets are now worth less than they were when Trump took office.
Bitcoin has fallen 8% so far this week and is on track for its worst weekly performance since March. In the process, Bitcoin price fell below the 200-day moving average, a support level that has been in the spotlight since the 2022 bear market. Bitcoin was trading at about $101,000 as of 9:30 a.m. London time on Friday.
While the recent sell-off has been broad-based, the steepest declines have been concentrated in altcoins — those smaller, more volatile coins — which have significantly underperformed the broader market this year.
Augustine Fan, a partner at SignalPlus, said: "With the exception of Bitcoin and Ethereum, the cryptocurrency market has mostly been in decline over the past few months. There has been almost no new money flowing into altcoins or decentralized finance (DeFi) projects."
He also added that mainstream market participation is likely to remain subdued due to a lack of near-term catalysts and ongoing concerns about safety and regulation.
Jeff Mei, chief operating officer of cryptocurrency exchange BTSE, said the latest round of declines in digital assets was partly due to "concerns that artificial intelligence stocks are significantly overvalued." “If we see a sell-off in AI and tech stocks, then Bitcoin is likely to fall below the $100,000 mark, and altcoins may suffer even greater losses,” he warned.
Despite the bleak market outlook, there are some signs of stabilization. U.S. Bitcoin and Ethereum spot ETFs saw $253 million in inflows on Thursday after six consecutive days of net outflows.