Shafaq News
Bitcoin’s rally above $126,000 in early October has
reversed sharply, with more than $1 trillion in market value wiped from digital
assets over the past six weeks, according to data reviewed by Shafaq News.
The total capitalization of cryptocurrencies has
fallen from around $4.2 trillion to below $3 trillion, erasing almost a quarter
of the market. Bitcoin alone has dropped more than 30% from its peak of
$126,000 on October 6, slipping into what analysts describe as a “severe
correction” rather than a structural collapse.
The October surge coincided with a stronger appetite
for high-risk assets, supported by a US regulatory environment friendlier to
crypto and renewed inflows into exchange-traded funds (ETFs) linked to Bitcoin.
That sentiment shifted abruptly on October 10.
Threats by US President Donald Trump to impose 100% tariffs on Chinese imports
triggered forced liquidations of leveraged positions exceeding $19 billion
within 24 hours, according to market-tracking platforms. Bitcoin fell from
above $122,000 to nearly $105,000, while smaller coins posted deeper losses as
millions of funded positions were closed across global exchanges.
Since then, the broader market has continued to
decline in intermittent waves. Western financial outlets estimate the
cumulative loss in digital asset capitalization at $1.1–1.2 trillion over 41
days, erasing most of Bitcoin’s gains since the start of 2025.
Tighter signals from the US Federal Reserve
reinforced the downturn. Officials warned that inflation remains above target,
reducing expectations for near-term interest-rate cuts and pushing capital
toward bonds and gold at the expense of non-yielding assets like crypto.
Major equity indices—the S&P 500, Germany’s DAX,
and Japan’s Nikkei—also posted notable declines this month. The FTSE 100 in
London recorded its steepest daily drop since April, driven largely by
sell-offs in high-valuation technology and artificial-intelligence companies.
Each pullback in these sectors has been mirrored by similar moves in digital
assets, underscoring Bitcoin’s continued classification as a high-risk growth
instrument rather than a safe-haven asset.
While individual traders remain visible in the
sell-off, large-scale outflows from Bitcoin ETFs have become a major pressure
point. Funds that were marketed as the bridge connecting crypto to
institutional capital are now facilitating rapid exits.
Research from financial agencies shows that US-listed
Bitcoin ETFs recorded net outflows of roughly $3–3.8 billion in November—their
worst monthly performance since launching.
BlackRock’s iShares Bitcoin Trust led the
withdrawals. Investors pulled more than $523 million in a single session, the
fund’s biggest one-day redemption. Data indicates that BlackRock’s share of
November’s net outflows exceeds $2 billion.
For asset managers who long argued that regulated
products would stabilize crypto markets, the latest numbers raise questions
about whether institutional participation can moderate volatility—or merely
accelerate it in times of stress.
Beyond interest-rate concerns and trade tensions,
the October episode reinforced a structural vulnerability: the crypto market’s
dependence on leveraged derivatives.
Research firms report that more than $19 billion in
funded positions were forcibly liquidated within 36 hours between October 10
and 11, marking one of the largest liquidation waves in the sector’s history.
Initial price declines triggered stop-loss levels, which in turn converted
leveraged buy orders into compulsory sell orders, amplifying the
fall—particularly for smaller tokens with limited liquidity.
Richard Teng, CEO of Binance, said the recent
volatility was “part of a normal cycle in high-risk assets,” arguing that the
market is undergoing a period of risk trimming and profit-taking after 18
months of strong performance. He noted that the turbulence is not unique to
crypto, with other asset classes also experiencing stress.
Losses are distributed across a broad group of
market participants. Economic media agencies report that millions of positions
have closed at a loss since the downturn began, with tens of thousands of
retail traders seeing full liquidations over a few sessions.
Crypto-linked equities have also declined sharply.
U.S. data indicates that shares of Coinbase and Robinhood lost more than 20% of
their value in November, while some publicly listed mining firms have fallen by
half.
Smaller and more speculative cryptocurrencies
continue to absorb deeper damage, with analysts noting that several
institutional portfolios have eliminated exposure to high-risk tokens due to
weak liquidity and unstable pricing.
Direct spillover to traditional banking remains
limited for now. However, the degree of exposure is rising through three
channels: Bitcoin ETFs, banking services for custody and liquidation of digital
assets, and listed companies holding substantial Bitcoin reserves on their
balance sheets.
Bitcoin options markets currently reflect cautious
pessimism. Derivatives data shows increased betting that the cryptocurrency may
end the year below $90,000, with fewer traders expecting a rebound above
$100,000 before late 2025.
Investment banks and research centers outline three
general scenarios for the coming months:
-Stabilization: Bitcoin trades within a wide range
of $70,000–$100,000 as institutional demand persists, but remains cautious.
-Downside risk: A potential global recession pushes
prices significantly below current levels.
-Upside recovery: Easing concerns over an AI-driven
equity bubble and the start of rate cuts could redirect inflows to crypto,
lifting Bitcoin back above $100,000.
Despite the volatility, some high-profile corporate
investors continue to buy. Filings from listed companies show that one firm
added more than 8,000 Bitcoins to its reserves in recent weeks, betting that
the current downturn is another phase in a longer market cycle.
Written and edited by Shafaq News staff.
