In brief
- Bitcoin has dropped from $126,000 to below $82,200 since early October, with $5 billion fleeing crypto ETFs
- Deutsche Bank cites five causes: risk-off sentiment, hawkish Fed, stalled CLARITY Act, waning institutional interest, and profit-taking.
- Unlike past crashes driven by retail, this downturn involves substantial institutional participation amid uncertain Fed policy.
Bitcoin price weakness over the past six weeks has been caused by broad risk-off investor sentiment, a hawkish Federal Reserve, the stalled CLARITY Act, waning institutional interest, and long-term holders taking profits, according to Deutsche Bank.
Deutsche analysts were hesitant to predict a rebound for the asset.
“Whether Bitcoin stabilizes after this correction remains uncertain,” the bank’s analysts wrote in a note shared with Decrypt. “Unlike prior crashes, driven primarily by retail speculation, this year’s downturn has occurred amid substantial institutional participation, policy developments, and global macro trends.”
Since early October, Bitcoin has plummeted from $126,000 to below $82,200, according to crypto price aggregator CoinGecko. At the time of writing, Bitcoin had rebounded to nearly $88,500 after having gained 1.8% in the past day.
But the broader picture remains troubling. Nearly $5 billion has left Bitcoin and other crypto-linked exchange traded products over that period. And billions worth of crypto derivatives contracts have been liquidated as futures traders try to ride out the storm. The volatility has been a test of how committed investors are to keeping BTC in their portfolios, the bank’s analysts wrote.
The total crypto market capitalization has fallen about 24%, or $1 trillion, since its October peak, according to the report.
The bank’s analysts said that while Bitcoin has often been touted as and compared to defensive hedges like gold and U.S. treasuries, it still hasn’t fully assumed that role with investors.
“Since October, Bitcoin has behaved more like a high-growth tech stock than an uncorrelated store of value. The average daily correlation between Bitcoin and the Nasdaq 100 index in 2025 YTD is 46%, and the correlation with the S&P 500 has risen to 42%,” the analysts wrote in a note shared with Decrypt. “Both correlations have sharply risen in recent weeks, reaching levels similar to those observed during the COVID-driven market stress of 2022.”
Gold and treasuries have steadily outperformed Bitcoin in recent months, the analysts added.
For a while, investors were certain that the Federal Open Markets Committee would lower interest rates again during its final meeting of the year in December. But remarks from Federal Reserve Chairman Jerome Powell and Fed Governor Lisa Cook have dashed those hopes.
“Further uncertainty around the Fed’s interest rate trajectory may continue to spur further declines in Bitcoin’s performance,” the bank’s analysts wrote. “This year to date, Bitcoin’s correlation of returns with Fed interest rates stands at -13%.”
There’s also been the matter of waning liquidity, the analysts wrote. “The dislocation from the October crash has set the tone for Bitcoin’s performance, creating a negative feedback loop between declining liquidity and falling prices,” the bank wrote.
It’s not just that the October crash affected liquidity that day, but rather that market makers got spooked and have been slow to rebound, Deutsche Bank wrote.
“According to data from Kaiko Research, order books across major crypto exchanges declined significantly that day, with ask-side liquidity effectively absent for several minutes,” they said. “This liquidity gap amplified the price impact and reduced market-maker willingness to provide liquidity.”
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