Bitcoin has felt the heavy selling pressure at the start of 2026, which further reinforces a severe correction that already wiped almost half of the value that it had gained over the past year at its all-time highs.
The largest cryptocurrency in the world is down over 20 per cent since the beginning of the year and has, instead of hitting new highs at the start of the second term of US President Donald Trump. Traded significantly lower, which generates new concerns about the longevity of the recent crypto cycle.
Following its highest point of more than $124,000 in October, the bitcoin dropped to the $60,000 to 67,000 level, which is considered among the steepest declines in recent years.
The most recent stint of weakness had bitcoin experiencing its biggest one-day decline since then last year, with the cryptocurrency declining as much as 12.6 percent within a single day to an approximate of 63,300. The action erased billions of dollars of market value in just a few hours and signaled the sharpest single-day drop in a long time since the panic of November 2022.
The sell-off came at the end of a mean week of the digital asset. Bitcoin fell by close to 17 percent during the week and stands at around 28 percent down in the year to date.
The cryptocurrency has lost nearly half of its value since it reached the highs of October, which further fuels the panic that the market is now in a long reset instead of a temporary adjustment.
One of the things that led to the unwanted sudden fall was the unwinding of leveraged positions at a very high rate.
The CoinGlass data indicate that almost 1 billion dollars of bitcoin positions were forced to be liquidated in 24 hours as the price fell below important technical zones. When those thresholds were passed, automated selling moved on a faster pace, which brought about a domino effect of increasing losses on the larger crypto market.
The second-largest cryptocurrency Ethereum was not an exception. Ether has fallen over 13 percent within one session, and has since then fallen by almost 38 percent in value. The drastic drop in the value of both major tokens highlights the level of stress in the digital asset ecosystem.
The crypto crash has occurred against the background of increasing risk aversion in the world. With the volatility in the financial markets, investors have been retreating out of risk-intensive assets.
Precious metals were volatile and silver fell as much as 18 percent in a single session and gold became extremely volatile as leveraged and speculative positions were liquidated. Equity markets were also hit. The S&P 500 dropped to a seven-week low, and the Nasdaq dropped to the lowest point in over two months as the hype over artificial intelligence-related stocks faded.
There are also fears over the monetary policy of the US which have also shaken sentiment. There was a nervous reaction to reports in markets that President Donald Trump is planning to nominate Kevin Warsh as the next Federal Reserve chair.
Investors are worried that Warsh might become more hawkish and this would reduce the balance sheet of the Fed, leaving liquidity tight. The future of tightening monetary policy is especially harmful to the industry of cryptocurrencies due to its previously positive performance in low-rate, high-liquidity markets.
Retreating has also been done by institutional investors. Deutsche Bank analysts stated that increased institutional exchange-traded fund outflows have been the main cause of the overall drop in crypto prices.
In January alone, above $3 billion of US spot bitcoin ETFs were redeemed, after approximately 2 billion in December and almost 7 billion in November. The gradual exit is an indication that conventional investors are growing more skeptical, maybe even pessimistic, of digital assets.
The pain has been increased by the increasing association between Bitcoin and technology stocks. Due to the severe correction of global software and AI-related stocks, investors also minimized investments in crypto.
Other players in the market have cautioned that the sustained weakness would add pressure on bitcoin miners, which may force them sell and this can result in another vicious cycle of decreases.
To further add to the bearish sentiment, some well-known investors such as Michael Burry (someone who correctly predicted the financial crisis of 2008) sounded alerts that bitcoin may be experiencing what he calls a death spiral.
After his remarks, bitcoin fell by another 12 percent within 24 hours with weekly losses amounting to approximately 25 percent. Burry opined that there is no organic use case reason why bitcoin can slow or cease to fall and warned that the fall towards the shape of 50,000 can drive some mining firms into bankruptcy.
The extent of the destruction is not limited to bitcoin. As reported by CoinGecko data, the cryptocurrency market in the world has devalued by approximately two trillion in the past few months after hitting an all-time high of approximately 4.38 trillion in the early part of October.
Over one trillion has already been erased in the last one month. According to Polymarket prediction platform, most traders have found themselves predicting bitcoin to altar below 60,000 within this month with about 45 percent betting that it will drop below 55,000.
Nevertheless, some areas of conservative hope still exist. Bitcoin made a small recovery on Friday, reaching higher than 3 percent to bring it to around 65,200 mark, after hitting the psychologically significant mark of 60,000.
Ether too recounted modestly and rose to hit almost 4 percent following a 10-month low in the session. However, analysts cautioned that the recovery is nothing much to reverse the overall bearish trend.
Other industry players believe that the sell-off is not such a disclosure of a structural failure in crypto but rather an effect of macroeconomic forces. Bill Barhydt, chief executive of Abra, added that markets are at an anti-everything trade and used tight liquidity, government shutdowns uncertainty and crypto legislation languishing as reasons.
He indicated that real-time inflation is close to zero, but bond markets are pricing in over higher rates which is a burden on risk assets. Barhydt is of the opinion that most of the selling pressure can be exhausted, and thus there would be an opportunity of a recovery later in the year.
Nic Puckrin, a co-founder of Coin Bureau, said that even though bitcoin ETFs are experiencing outflows, there is evidence that many ETFs users are currently sitting on paper losses, and long-time bitcoin holders are selling most.
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He called the present stage the institutionalization of bitcoin in practice and more and more the asset should act as a traditional financial market in bad times.
Wenny Cai chief operating officer at SynFutures has stated that the fall under the low $70,000 level has washed out overcrowded positions accumulated in the post-ETF run-up.
