It took cryptocurrencies just over a month to erase almost the entire increase in market value since the beginning of the year.
At its peak on October 6, the total market capitalization approached a record $4.4 trillion, but since then a 20% drop has left the asset class with moderate growth of only 2.5% since the beginning of the year, according to CoinGecko.
The decline began after the sudden liquidation of about $19 billion of margin positions just a few days after reaching a historic high, which undermined investor confidence. Moreover, there are few reasons for traders to bet on a rebound at the moment.
This result came as a surprise at a time when regulators, global banks, and institutional investors have become more supportive of digital assets.
Trump's initiative to secure the status of a global crypto center for the United States provoked a wave of activity and at the moment raised bitcoin by 35%. However, the reversal of sentiment turned out to be so rapid that the capitalization of digital assets is now below the level recorded at the time Trump took office.
Bitcoin has fallen by 8% since the beginning of the week, threatening its worst week since March. At the same time, the price dropped below the 200—day moving average, an important support level that has been held since the bear market of 2022. On Friday, bitcoin was trading just above $100,000.
Although the sell—off was widespread, the biggest losses were in altcoins - smaller and more volatile tokens that are lagging significantly this year.
"With the exception of bitcoin and ether, the crypto market as a whole has been on the defensive for months," said Augustine Fan, partner at SignalPlus. — "Little new capital is being invested in alt tokens or DeFi projects."
In the absence of catalysts and amid ongoing concerns about security and regulation, the participation of mass investors is likely to remain weak, he added.
Jeff May, chief operating officer of the BTSE crypto exchange, noted that the latest drop was partly caused by "concerns that AI stocks are highly overvalued." He warned: "If we see a sell-off in AI and tech stocks, it is very likely that bitcoin will fall below the $100,000 mark, and altcoins will sink even more."
Despite the gloomy mood, there are signs of stabilization: after six consecutive days of net outflows, spot ETFs for bitcoin and ether in the United States recorded an influx of $253 million on Thursday.