Bitcoin slid as low as $80,500 on Friday, marking a 35% decline from its October peak. According to CoinMarketCap’s Fear and Greed Index, investor fears have risen to levels not seen since the market lows of early 2024.
In a new research report, Deutsche Bank attributes the fall of the world’s largest cryptocurrency (and the broader crypto market) to five leading drivers:
- A broad drop in equities and risk sentiment
- A hawkish turn in US monetary policy
- Regulatory uncertainty despite earlier legalisation progress
- Outflows from institutional crypto vehicles
- Profit-taking by long-term holders
Macro headwinds
The S&P500 is down 3.4% since the beginning of the month and on track for its worst performance since March, according to Coinbase data. This dip occurs despite Nvidia’s better-than-expected earnings last week, which largely dismissed rising worries of an AI bubble.
Monetary policy remains a central pressure point. On Wednesday, the US Federal Reserve released the FOMC minutes from its last meeting, revealing a much higher degree of uncertainty than previously thought regarding a potential rate cut in December. The bank also noted a rising correlation between Bitcoin and US stock indices, making crypto increasingly sensitive to these macro shifts.
Regulatory stalls
Regulatory uncertainty continues to act as a headwind for digital assets. While the GENIUS Act was passed in July, establishing a clear framework to classify digital assets and appointing the CFTC as the asset class’s main governing body, the CLARITY Act has yet to reach approval, leaving gaps in the oversight of market structure and stablecoins.
Institutional flows and profit taking
Institutional appetite for digital currencies had been rising, with a growing array of compliance-friendly investment vehicles making it easier for Wall Street to gain crypto exposure. However, the trend reversed sharply in November.
Crypto ETFs have seen significant net outflows recently. According to data from Farside Investors, Bitcoin and Ether (ETH) funds saw more than $1bn and $500mn in net outflows, respectively, last week.
Finally, Deutsche Bank highlighted that over 800,000 BTC were sold by long-term holdings in the past month, suggesting profit-taking-driven selling pressure after the October highs.
“Bitcoin’s integration into portfolios will not be linear, and uncertainty and leverage can amplify declines, making disciplined risk management essential as the market evolves,” the report concluded.
