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.