Crypto Market on Thin Ice: Will the Downturn Turn into a “Crypto Winter”?
The cryptocurrency market has been experiencing a significant downturn in recent months, with Bitcoin’s price dropping 25% since early October, trading at around $92,000. Ethereum’s price has also declined by almost one-third, hovering above $3,000. The total crypto market capitalization has shrunk by about a quarter over that period, shedding more than $1 trillion.
Details
The market’s decline has been attributed to a combination of factors, including the “flash crash” on October 10, which was triggered by President Donald Trump’s threat of fresh tariffs on Chinese imports. This event led to a 10% drop in Bitcoin’s price in a week, with over 1.6 million crypto traders facing liquidations and a record $19 billion in liquidated positions.
Previous Market Cycles
Historically, when bull markets have ended, crypto winters have followed. However, in those cases, downturns have only been classified as “winters” when Bitcoin sits about 70%-80% lower than its all-time high. With the coin only 25% lower than its record, it’s unclear whether the current downturn will progress into a full-blown winter.
Mainstream Adoption and Market Sentiment
The four-year cycle may no longer be a reliable gauge of price movements due to mainstream crypto adoption. Traditional retail and institutional investors have poured into digital assets, accounting for a larger section of the market. This has led to a strengthening correlation between Bitcoin and the tech-heavy NASDAQ 100 index, with the average correlation this year being 0.52, up from 0.23 in 2024.
Expert Opinions
While some experts, such as JPMorgan analysts, believe that the bull market remains and that the market is less susceptible to price swings and cycles, others, like Bloomberg Intelligence’s Senior Commodity Strategist Mike McGlone, forecast a bear market, citing the need to purge “silly cryptos” and the potential for stocks to decline next year.
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