The cryptocurrency market lost nearly half a trillion dollars in less than a week, as a sell-off led by Bitcoin accelerated. The total value of the cryptocurrency market fell by approximately $467.6 billion since January 29, with Bitcoin dropping to its lowest level since President Donald Trump's re-election in early November 2024, an event that brought with it a more pro-digital administration.
The world’s largest cryptocurrency recovered some ground during trading on Wednesday, after hitting a 15-month low of $72,877 in the United States, and later traded near $76,600 at 6:50 a.m. London time.
Deep losses despite political and institutional support
Despite the arrival of a more accepting US administration for the cryptocurrency market, and the accelerating pace of adoption of digital assets by major institutions, Bitcoin has fallen by about 40% since its historic high in early October.
This collapse comes after a brutal sell-off on October 10 that wiped out about $19 billion in leveraged positions on cryptocurrencies, a shock from which the broader market has yet to recover.
Rachel Lucas, an analyst at BTC Markets, said that trading sentiment in the Asian session was cautious and defensive, noting that risk aversion still prevailed in the market, although the pace of forced selling slowed compared to the close of US markets. However, she explained that Bitcoin's drop below the $73,000 level pushed investor sentiment into a state of extreme fear.
Has Bitcoin failed to play the role of a safe haven?
These losses followed a highly volatile week in global markets, which also saw sharp movements in gold and silver prices. While precious metals managed to attract buyers on Tuesday after a previous sell-off, cryptocurrencies failed to garner any supportive demand.
Bitcoin fell alongside US stocks amid escalating tensions between the United States and Iran, prompting investors to seek safe-haven assets away from high-risk assets.
The sharp decline in Bitcoin has reignited doubts about its ability to act as digital gold, after it failed to function as a safe haven during a period of escalating geopolitical risks. Investor Michael Perry warned this week that Bitcoin is now exposed as a purely speculative asset and has failed to establish itself as a hedging tool like precious metals.
Standard liquidations and fluctuations in fund flows
Over the past 24 hours, more than $700 million in bullish and bearish bets have been liquidated in the cryptocurrency perpetual contracts market, bringing total liquidation losses since January 29 to more than $6.67 billion.
Meanwhile, flows into Bitcoin exchange-traded funds (ETFs) in the US continued to fluctuate, with these funds recording net inflows of about $562 million on Monday, before investors withdrew about $272 million from them on Tuesday.
Michael Novogratz, CEO of Galaxy Digital, said that the Bitcoin market has always been characterized by a great deal of almost religious faith in the idea of holding onto the digital currency no matter what, but he noted that this fever has begun to fade, and investors have already started to sell.
