Causes Behind the Cryptocurrency Crash

Bitcoin has now entered a downward spiral, peaking at around US$126,000 in early October 2025 and bottoming out at a temporary time of below US$90,000 by mid-November, which is a loss of about a quarter of the recent peak. 

The causes of this sharp decline can be the combination of several mutually dependent factors i.e, the decline in optimism due to preliminary pro-cryptocurrency rhetoric of the Trump administration, an increase in global trade tensions, a decrease in the investor risk premium in the context of a general market decline. 

The gains which have already been realized earlier in the calendar year were anchored by the possibility of Federal Reserve interest-rate cuts in reaction to an underwhelming American job statistic; the later collapse of those hopes have solidified the U.S. dollar and triggered billions of dollars of liquidations in Bitcoin exchanges. 

Researchers argue that Bitcoin is currently acting more like a macroeconomic asset by being sensitive to liquidity levels, policy signals, and dollar robustness and not to inherent supply demand processes that characterize the Bitcoin splitting process. 

The Bitcoin crash can be explained mostly by the combination of the several factors: the drop in risk-taking among investors, failed expectations about the Federal Reserve interest rate decreases, and a re-consideration of the value of cryptocurrencies in the portfolio of major investors. 

To put it in less sophisticated terms, market participants have become more cautious, disappointed with the performance of the market, and the institutions are modifying the way they use Bitcoin in their investment policies. 

The Story of the Bitcoin Crash

The market price of Bitcoin declined by about nearly 30% in six weeks, which commenced with the unprecedented peak of $126,251 in early October and 10-year-low of under $90,000 as of mid-November 2025. 

The first climb came through the loud campaign made by President Donald Trump, who advocated the acceptance of cryptocurrencies as well as the Fed’s policy softening aimed at boosting the economy after poor labor-market data. 

On the contrary, the re-emergence of trade war with China under Trump leadership, and the specter of a permanent global trade confrontation, shook investments into places considered to be secure, and led to massive sell-offs in Bitcoin and other digital currencies, including Dogecoin. 

Institutional Behavior and Market Sentiment

There has been a huge exit by the market makers in the retail market and the institutional sources of capital have displayed a strong deceleration amidst disaggregated liquidity and lost belief. 

The modern market model seems to be dictated by macro-economic factors like forcible dollar infusion and federal reserve-level indicators more than it is directly managed by crypto-relative ones like the halving protocol. 

The capital inflows of the ETF have slowed down significantly after previous excitement in Wall Street. 

At the same time, many long-term investors had made profits around the very peak of Bitcoin. 

Jake Kennis, an analyst at the crypto data platform Nansen, stated:

“At this point, Bitcoin is trading more like a macro asset embedded within institutional portfolios, responding far more to liquidity, policy, and dollar dynamics than to mechanical supply shocks.”

Broader Market Context  

The government shutdown caused by prolonged time in the United States was the longest in the history of the country and it hindered the release of vital economic information, thus making the market even more uncertain. 

The federal reserve members have been issuing mixed messages about a looming rate cut hence strengthening the dollar but putting pressure on risk-averse assets, including equities and cryptocurrencies. 

This environment has enhanced volatility in the market and made liquidity limited; extensive buy and sell volumes at this stage cause considerable price impact. 

In the meantime, other theoretical tools, including tokens tied to the artificial intelligence and stable coins have drawn money that could otherwise have been invested in Bitcoin.  

Future Outlook  

Despite the current cycles representing an air of “disenchantment and investor cautions in respect of cryptocurrencies, Bitcoin is upheld by institutional interest proliferation and clearer regulatory frameworks in places like the European Union and the United Kingdom. 

Analysts project the possibility of speedy recovery of price in case the Federal Reserve announces reduction in rate in December considering positive economic outputs that have emerged. 

However, the further adoption faces the challenge of volatility and investor sentiment fluctuation as the obstacles to the mainstream penetration of Bitcoin as a hypothetical commodity and a possible hedge. 

The changing macro-economic environment is bound to determine the future of Bitcoin in the predictable future.