Bitcoin’s 40% Plunge in Four Months Sparks Panic Among Crypto’s Biggest Bulls

Bitcoin’s freefall continues to rattle the cryptocurrency market as the world’s most valuable digital asset has now shed nearly 40% of its value in just four months, leaving institutional investors fleeing and crypto’s most vocal proponents scrambling for explanations.

By Thursday, Bitcoin had tumbled another 21% to $60,062, marking a staggering decline from its all-time high of $123,742 reached last October. The cryptocurrency has now lost almost 30% in a single week alone, according to Deutsche Bank analyst Marion Laboure, who warned that “traditional investors are losing interest, and overall pessimism about crypto is growing.”

The timing couldn’t be worse for Bitcoin enthusiasts. The current slump comes despite what should have been favorable conditions: Donald Trump’s re-election victory, his promises to position cryptocurrency as “one of the greatest industries on earth,” and the creation of a strategic national Bitcoin stockpile. Instead, Bitcoin’s price sits lower today than it did before the 2024 election.

Institutional Exodus Accelerates

Perhaps most troubling for Bitcoin’s future is the apparent reversal of institutional support. CryptoQuant’s Wednesday report delivered a sobering assessment: “Institutional demand has reversed materially.” This marks a dramatic shift from just months ago when large institutional investors were credited with propping up Bitcoin’s price.

The selling pressure has been relentless and indiscriminate. Ether, the second-largest cryptocurrency, dropped 24% to $2,052, representing a 59% decline from its peak last year. The broader crypto market has been caught in the downdraft, with few safe havens available.

What makes this crash particularly perplexing is the absence of a clear catalyst. “The worst part for some of crypto’s permabulls is that they aren’t sure what exactly caused the crash,” the Wall Street Journal reported Saturday. The uncertainty has left market luminaries—known simply as “Pomp,” “Novo,” and “Mooch”—searching for answers in vain.

Michael Novogratz, CEO of Galaxy Digital, admitted the obvious: “There was no smoking gun.” Anthony Scaramucci, the former White House communications director turned crypto bull, echoed the sentiment: “If you ask five experts, you’ll get five explanations.”

The Digital Gold Hypothesis Crumbles

The current crisis appears to be centered on the fundamental question of Bitcoin’s utility and value proposition. Growing investor caution comes as many of the sensationalized claims about Bitcoin have failed to materialize. The token has largely traded in the same direction as other risk-on assets, such as stocks, undermining its narrative as a safe-haven asset uncorrelated with traditional markets.

Adoption as a form of payment for goods and services has been minimal, contrary to early predictions that Bitcoin would revolutionize commerce. The “digital gold” thesis—that Bitcoin would serve as a store of value during economic uncertainty—has been particularly hard hit as the cryptocurrency has demonstrated a propensity to sell off during risk-off periods.

Economist Paul Krugman, writing on his Substack, pointed out the irony: Bitcoin’s price is now lower than it was before the 2024 election, despite candidate Trump’s promises to make cryptocurrency “one of the greatest industries on earth.”

CNN captured the market’s bewilderment with its headline: “No, but seriously: What’s going on with bitcoin?” The story began with an observation that resonates throughout the crypto community: “Bitcoin is acting weird.”

The strangeness lies not just in the magnitude of the decline but in its timing. “Crypto is notoriously volatile, and it’s gone through numerous crashes that are bigger than this one,” CNN noted. “What’s strange is this: Bitcoin’s four-month slump has come at a time when, in theory, it had everything going for it.”

Market Theories Abound

As the price continues its downward trajectory, theories about the cause proliferate. Some point to investors pivoting toward prediction markets and other risky bets. Others suggest widespread profit-taking after a blistering bull run that saw Bitcoin triple in value over the previous year.

The absence of a clear explanation has only heightened market anxiety. When a major asset class experiences such severe declines without an identifiable trigger, it suggests deeper structural issues rather than temporary market dislocation.

The current environment bears uncomfortable similarities to the 2022 crypto winter, when the collapse of Terra/Luna and the FTX exchange triggered a broader market meltdown. While no single event has emerged to explain the current decline, the market’s vulnerability to sudden, severe corrections remains evident.

What’s Next for Crypto?

The question now facing investors, regulators, and crypto enthusiasts alike is whether this represents a temporary correction or the beginning of a prolonged bear market. The answer may depend on whether Bitcoin can reestablish its narrative as a unique asset class with properties distinct from traditional risk assets.

For now, the market remains in a state of confusion and fear. The steady selling suggests that traditional investors are reassessing their crypto exposure, while the absence of clear explanations leaves the door open for further volatility.

As Bitcoin hovers around $69,549—down from its highs but showing some signs of stabilization—the crypto community waits anxiously to see whether this is merely another bump in the road or the beginning of a more fundamental reassessment of digital assets’ role in the global financial system.

Tags

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