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Bitcoin has fallen to around $65,000. There is still no sign of an end to the sell-off and fears of a "crypto winter" are growing.
Bitcoin, the world's leading cryptocurrency, continued its sharp decline this week. On Thursday, it entered a clear crisis phase, losing more than 10% of its value in a few hours and temporarily dropping near the $60,000 level.
Such a decline had not been seen since November 2022, following the collapse of the FTX cryptocurrency exchange.
For some analysts, this marks the beginning of a new “crypto winter.” Others even speak of the end of the “Bitcoin success story.” On Friday, the price recovered slightly, but compared to the record high of over $125,000 reached in October of last year, Bitcoin has already lost more than half of its value.
The rise in cryptocurrency prices in 2024 was partly driven by US President Donald Trump, who has declared his intention to make the US the “crypto capital of the world” and has promoted a more friendly regulatory environment for the sector. However, since October, the trend has reversed and the pace of sales is accelerating.
According to an analysis by the Neue Zürcher Zeitung, there are 6 main reasons for this sharp decline:
Bitcoin is not behaving like “digital gold”
The idea that Bitcoin serves as a hedge against inflation or political uncertainty has lost weight. In times of tension, investors are turning to gold, not cryptocurrencies. Even the weakening of the US dollar is not being compensated by Bitcoin.
Monetary policy remains tight
The prospect of tighter monetary conditions in the US, including expectations of a stronger dollar, is putting pressure on high-risk assets, such as cryptocurrencies.
Massive sell-off in tech sector as well
The decline in tech stocks, especially those related to artificial intelligence, is also directly affecting Bitcoin. When tech stocks fall, Bitcoin usually suffers even bigger losses.
Debt accelerates the decline
Many investors have entered the market with debt. When the price falls below certain levels, automatic sales are activated, which further deepens the decline. According to Pascal Hügli from private bank Märki Baumann, the market has not yet found a stable floor.
Capital withdrawal from ETFs
Institutional investors are also withdrawing. In the US alone, billions of dollars have been withdrawn from Bitcoin spot ETFs in recent months. Deutsche Bank analysts Marion Laboure and Camilla Siazon point out that these outflows are significantly worsening the market situation.
Fears over the development of quantum computers
Advances in quantum computer technology are raising questions about the long-term security of the Bitcoin system. Although this risk is seen as medium to long-term, it is negatively affecting investor confidence.
The Crypto Fear and Greed Index currently signals “extreme fear” in the market, an indication that investor confidence has weakened significantly.
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