Bitcoin Plunges, Contributing to $2 Trillion Crypto Market Loss

Bitcoin experienced a significant decline on Thursday, falling to a low of $66,675.12, marking its weakest point since October 2024. This downturn is part of a broader trend, with the global cryptocurrency market losing $2 trillion in value since its peak of $4.379 trillion in early October, according to data from CoinGecko. The drop has been attributed to a combination of weakening risk sentiment, volatility in precious metals, and a selloff in technology shares.

As of Thursday, Bitcoin was down 6.5%, trading at $67,817. Over the past week, Bitcoin has fallen 11%, contributing to a total loss of 23% for the year. Ether, the second-largest cryptocurrency by market capitalization, also suffered, dropping more than 7% to $1,973. Ether’s losses for the week approached 14%, and it has now fallen approximately 34% this year.

The current sentiment surrounding cryptocurrencies has been heavily influenced by recent fluctuations in both metals and equities. Precious metals such as gold and silver have seen increased volatility due to leveraged buying and speculative trading. Silver, in particular, dropped as much as 16.6% to a low of $73.41. In the stock market, the S&P 500 reached near two-week lows, while the Nasdaq index fell to its lowest level in over two months, with the artificial intelligence sector coming under renewed scrutiny.

“It’s clear the crypto market is now in full capitulation mode,” stated Nic Puckrin, investment analyst and co-founder of Coin Bureau. He emphasized that, based on historical patterns, this downturn is not just a short-term correction but a transition that could take months to stabilize.

The decline in cryptocurrency values has adversely affected shares of companies holding Bitcoin and other digital assets, raising concerns about the potential for market turmoil to extend beyond token prices. Sentiment worsened following Donald Trump‘s selection of Kevin Warsh as his candidate for the next Federal Reserve chair. Market expectations suggest that Warsh may implement measures to reduce the Fed’s balance sheet, which has historically supported speculative assets like cryptocurrencies.

“The market fears a hawk with him,” commented Manuel Villegas Franceschi from the next generation research team at Julius Baer. He noted that a smaller balance sheet would not provide favorable conditions for cryptocurrencies.

Cryptocurrencies have faced challenges since a record crash last October, which saw Bitcoin prices plummet as leveraged positions were liquidated. This has led to diminishing investor interest and fragile sentiment within the industry. Analysts from Deutsche Bank noted that the broader decline is largely driven by heavy withdrawals from institutional exchange-traded funds (ETFs). They reported that U.S. spot Bitcoin ETFs experienced outflows exceeding $3 billion in January, following substantial withdrawals of around $2 billion and $7 billion in December and November, respectively.

“This steady selling signals a growing pessimism about cryptocurrencies among traditional investors,” the analysts stated in a note to clients.

The fortunes of Bitcoin have been closely tied to the broader technology sector, where investor enthusiasm for artificial intelligence had previously supported its value. This week’s downturn in global software stocks has further exacerbated declines in the values of Bitcoin, Ether, and other cryptocurrencies.

Market observers are beginning to question whether this decline signifies the beginning of a more severe correction. Concerns have been raised about crypto miners and the potential for forced liquidations if prices continue to drop, which could create a detrimental cycle. Mohit Kumar, a strategist at Jefferies, expressed caution, stating, “Our view on crypto has always been that it should comprise only a small portion of an overall portfolio. However, it is also an asset class heavily owned by retail investors, adding to overall market risk.”

As the cryptocurrency market grapples with these challenges, the outlook remains uncertain, underscoring the need for investors to proceed with caution in this volatile landscape.