The cryptocurrency market experienced significant turbulence this week as bitcoin's value dropped sharply, briefly falling below the $90,000 mark on Tuesday. This represents a dramatic decline from its record high of approximately $126,251 reached just last month.
What Triggered the Bitcoin Price Collapse?
Before this recent downturn, bitcoin had been enjoying a remarkable bull run, breaking multiple records following Donald Trump's return to the White House. The US president had expressed strong support for cryptocurrencies during his re-election campaign and maintained this position afterward.
Bitcoin first crossed the $100,000 threshold in May before climbing to its October peak. Market analysts noted that initial support came from expectations of interest rate cuts by the Federal Reserve, particularly after weak US jobs data emerged that put pressure on the dollar.
The situation changed dramatically when President Trump reignited trade war concerns with China last month, causing investors to seek safer assets rather than volatile cryptocurrencies like bitcoin.
The Impact on Crypto Investors
Those who had bet on bitcoin's continued rise suffered substantial losses. According to Rachael Lucas, a crypto analyst at BTC Markets, approximately $20 billion worth of bitcoin trades were liquidated during this downturn.
The decline wasn't limited to bitcoin alone. Other digital currencies also felt the pressure, including Dogecoin, the speculative token famously promoted by Elon Musk. The broader financial markets witnessed sell-offs across assets perceived as risky, including stocks.
This market uncertainty was compounded by the longest US government shutdown on record, which prevented the release of crucial economic data that investors rely on to gauge the Federal Reserve's next moves regarding interest rates.
What's Next for Bitcoin and Cryptocurrencies?
Simon Peters of brokerage firm eToro offered a glimmer of hope, telling AFP that "renewed expectations from the market for a rate cut in December on the back of some favourable economic data could quickly cause prices to reverse and rally again very quickly."
However, John Plassard of private bank Cite Gestion pointed to a deeper issue, noting that the current "disenchantment reflects a deeper reality" where individual investors remain wary due to previous cryptocurrency price plunges.
Thomas Probst of crypto data firm Kaiko highlighted that volatility remains "an obstacle" to widespread cryptocurrency adoption at both individual and institutional levels.
Despite current challenges, the cryptocurrency sector continues to benefit from growing institutional interest and regulatory developments worldwide. The European Union has established its MiCA regulatory framework, while London is expected to propose its own cryptocurrency rules in 2026.
Bitcoin, created in the aftermath of the 2008 global financial crisis, initially promoted libertarian ideals and aimed to challenge traditional financial institutions. The identity of its creator, Satoshi Nakamoto, who published the founding white paper on October 31, 2008, remains unknown to this day.
