Bitcoin has entered a bear market, dropping over 30% from its early October peak of around $126,000, following a flash crash triggered by President Trump's renewed trade war with China. The cryptocurrency wiped out $1 trillion in value over six weeks, with a single-day loss of $19 billion on October 10 due to panic selling and liquidations. While recovering slightly to about $88,000 on Monday, concerns over Federal Reserve rate decisions and leveraged positions continue to unsettle investors.
The cryptocurrency market has experienced severe volatility in recent weeks, with Bitcoin leading the downturn. It reached a record high of $126,000 in early October before plunging below $81,000 on Friday, November 21, after slumping to a seven-month low of $80,554. By Monday, November 24, Bitcoin traded around $88,000, up nearly 2% in 24 hours but lagging a broader stock market rally, as the S&P 500 fell only 3% from its peak.
A key trigger was the October 10 flash crash, when President Donald Trump threatened additional 100% tariffs on Chinese imports, reigniting trade war tensions. This prompted widespread panic selling and automatic liquidations in the highly leveraged crypto market, erasing $19 billion in a single day—the largest such event in history. "Bitcoin is down almost 31 per cent from its peak in early October," noted independent economist Saul Eslake, attributing much of the drop to leveraged investors facing margin calls, forcing sales to cover loans.
Unlike past crashes driven by retail speculation, this downturn involves substantial institutional money from spot Bitcoin funds approved by US regulators last year. Mainstream investors, less ideologically committed than early adopters, have contributed to heightened sensitivity. "The bottom line is, bitcoin is for normies now," said Steve Sosnick, chief strategist at Interactive Brokers. "As a result, the normies are going to view it as another speculative holding in their portfolio."
Broader anxieties include Federal Reserve interest rate decisions and fears of an AI bubble bursting, as digital assets remain tied to risk appetite. Deutsche Bank analysts warned, "Whether Bitcoin stabilizes after this correction remains uncertain," citing global macro trends and policy shifts. Outflows from Bitcoin exchange-traded funds have accelerated, with the market on track for its worst month since the 2022 collapse of FTX. While some recovery occurred over the weekend amid hopes for a December Fed rate cut, skeptics like Eslake highlight Bitcoin's lack of intrinsic value and risks of contagion to wider financial markets, potentially forcing sales of stocks and bonds.
