Bitcoin Price Plunge Wipes Billions Off Crypto Market
Bitcoin has experienced a sharp decline in recent days, leading to its lowest price in over a year and wiping billions of dollars from the cryptocurrency market. The plunge continues amid broader concerns about financial markets and the future of technology companies.
Price Drop and Market Impact
On Thursday, bitcoin's price fell below $70,000, marking its weakest level since November 2024, when Republican Donald Trump won the US presidential election after signalling his support for crypto during the campaign. Bitcoin has fallen nearly 8% for the week, bringing its losses for the year so far to nearly 20%. Ether, which was down nearly 2% at $2,090, is down close to 30% this year.
Triggered by Federal Reserve Nomination
Analysts say the latest rout in cryptocurrencies, which has come hard and fast, was triggered by the nomination of Kevin Warsh as the next Federal Reserve Chair. Expectations that he could shrink the Fed's balance sheet have spooked the market, as cryptocurrencies have widely been regarded as beneficiaries of a large balance sheet. They tended to rally while the Fed greased money markets with liquidity, providing support for speculative assets.
"The market fears a hawk with him," said Manuel Villegas Franceschi from the next generation research team at Julius Baer. "A smaller balance sheet is not going to provide any tailwinds for crypto."
Significant Value Losses
The global crypto market has lost nearly $1.9 trillion in value since hitting a peak of $4.379 trillion in early October, based on data from CoinGecko, with some $800 billion wiped out in the last month alone. Cryptocurrencies have struggled for months since a record crash last October sent bitcoin tumbling from a peak as leveraged positions got washed out, leaving investors less keen on digital assets and sentiment towards the industry fragile.
Institutional Outflows and Pessimism
Deutsche Bank analysts noted in a client report that this broader decline is mainly driven by massive withdrawals from institutional ETFs. These funds have seen billions of dollars flow out each month since the October 2025 downturn. U.S. spot bitcoin ETFs witnessed outflows of more than $3 billion in January, following outflows of about $2 billion and $7 billion in December and November respectively.
"This steady selling in our view signals that traditional investors are losing interest, and overall pessimism about crypto is growing," the analysts said.
Link to Tech Sector and Future Risks
Bitcoin's fortunes have been tied to the broader tech sector for some time, with prices often rising on investor enthusiasm over artificial intelligence. This week's rout in global software stocks has accelerated the slide in the value of bitcoin, ether, and other tokens. Market watchers are starting to question if this decline marks the start of a steeper correction.
"Concerns are being raised around the crypto miners and whether we could be looking at forced liquidations if prices continue to fall, which could lead to a vicious cycle," Jefferies strategist Mohit Kumar said in a note. "Our view on crypto has always been that it should be never more than a very small portion of the overall portfolio. However, it is also an asset class that is heavily owned, particularly by retail investors, and hence adds to the overall market risk."
Additional reporting by agencies.
