Bitcoin’s momentum has sharply reversed in recent weeks, with the world’s largest cryptocurrency falling nearly 30% from its 2025 peak and trailing far behind traditional financial assets. Despite once being hailed as a high-growth opportunity, an inflation shield, and a strong portfolio hedge, Bitcoin is now facing the possibility of closing the year with negative returns.
The downturn has put Bitcoin behind nearly every major asset class. Gold, often dismissed by crypto advocates as outdated, is significantly outperforming the digital asset. Long-term bonds, the Nasdaq, and even historically steady sectors such as U.S. utilities have outpaced Bitcoin’s decline during a year defined by cooling interest rates and fading investor appetite for risk.
The weakness became more apparent this week as Bitcoin briefly slipped below $90,000—near the average entry point of ETF investors since the launch of spot Bitcoin funds. Although the cryptocurrency bounced slightly above this level, it remains far from its record highs, raising concerns among retail and institutional holders.
A Year That Was Expected to Be Crypto’s Turning Point
Many traders had anticipated 2025 to be a milestone year for digital assets. Supportive political sentiment, new token-based ETF approvals, and strong institutional inflows had set the stage for broader adoption. Instead, the market has fallen into a familiar cycle: rapid enthusiasm, a sharp correction, and growing uncertainty.
Bitcoin’s inability to serve its intended roles—as an inflation hedge, a growth asset, and an uncorrelated store of value—has become increasingly evident. While volatility remains constant, reliability has diminished, prompting professional investors to reassess its place in diversified portfolios. In recent months, Bitcoin has failed to absorb losses during global selloffs or amplify gains during recoveries, reducing its appeal as a strategic investment tool.
What Triggered the Drop?
Analysts point to multiple factors behind Bitcoin’s downturn. One major catalyst was the violent market crash in early October, which wiped out nearly $19 billion in leveraged crypto positions. The sudden liquidation shook confidence across the market and continues to influence risk appetite and liquidity provision.
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Others highlight broader global market pressures. Weak economic data from Asia, concerns surrounding Chinese equities, and recalibrations in tech valuations ahead of major corporate earnings have pushed investors toward safer assets. With overall liquidity conditions thin, Bitcoin has traded more like a highly leveraged macro asset than a defensive hedge.
Growing concerns of an approaching bear market have further intensified caution among traders and institutions.
Defensive Trading Dominates the Crypto Landscape
Despite the downturn, Bitcoin still trades comfortably above levels seen before major political shifts. Its history of steep declines followed by strong rebounds also leaves room for optimism among long-term holders. However, current market behavior suggests caution rather than confidence.
Demand for downside protection around the $80,000–$85,000 range has surged, and options data indicates less than a 5% likelihood of Bitcoin retesting its all-time highs above $126,000 before the end of the year.
Some strategists believe a key support level is emerging. If Bitcoin holds above $90,000, it could signal stabilization and potentially restore strength to the broader digital asset market. But for now, investors remain wary as the cryptocurrency battles to regain its footing.
