Written by Frode Skar, Finance Journalist.
The Bitcoin bloodbath has erased the entire Trump driven crypto rally
A deep market sell off forces a reassessment of crypto’s role as a risk asset
Bitcoin has suffered a sharp collapse, wiping out all gains accumulated after Donald Trump’s election victory and underscoring how exposed the cryptocurrency remains to broader market stress. On Thursday, bitcoin fell below 64,000 dollars for the first time since 2024, marking one of the most severe downturns in years and reigniting debate over crypto’s resilience in investor portfolios.
The sell off has not occurred in isolation. It has unfolded alongside widening losses across high growth technology stocks and other risk assets, erasing trillions of dollars in combined market value and challenging the narrative that bitcoin can act as a durable hedge during periods of financial instability.
One of the steepest daily drops in years
Bitcoin plunged nearly 13 percent in a single session, its largest one day decline in several years. The move was accelerated by forced liquidations as leveraged traders were pushed out of positions when prices broke through key technical levels.
The pressure spread quickly across the digital asset space. Ether, the second largest cryptocurrency, recorded even steeper percentage losses, while the broader crypto market experienced a rapid contraction in liquidity and confidence.
Post election optimism fully unwound
The rally that followed Trump’s election was driven by expectations of more favorable crypto policies and stronger institutional adoption. Those hopes propelled bitcoin to an all time high above 126,000 dollars in late 2025.
That optimism has now fully reversed. Roughly half of bitcoin’s value has been erased since the peak, reinforcing skepticism that political tailwinds alone can provide lasting price support in a market still dominated by speculative flows and shifting sentiment.
Crypto declines alongside weakening equity markets
The downturn has coincided with growing weakness in global equity markets. Both the S and P 500 and the Nasdaq have extended their declines this week, as investors reassess valuations and earnings prospects, particularly in sectors closely tied to artificial intelligence spending.
This correlation highlights a persistent pattern. Rather than acting as a safe haven, bitcoin continues to trade like a high risk asset, closely linked to broader market conditions and investor appetite for risk.
Liquidations intensify downward momentum
Reports indicate that more than one billion dollars in bitcoin positions have been forcibly liquidated in a short period, amplifying selling pressure. Since the October peak, the crypto market has lost an estimated two trillion dollars in value.
Analysts attribute the decline to a combination of equity market volatility, deteriorating sentiment and reduced attractiveness of risk assets. As both technology stocks and cryptocurrencies weaken simultaneously, diversification benefits have largely evaporated.
Institutional outflows weaken market support
Another factor adding to the fragility has been rising outflows from exchange traded bitcoin funds, particularly in the United States. When institutional investors reduce exposure, an important liquidity buffer is removed, leaving prices more vulnerable to sharp moves.
The absence of aggressive institutional dip buying has shifted market dynamics toward retail driven sentiment and speculative trading, increasing volatility and downside risk.
Signs of full capitulation emerge
Some market observers describe the current phase as full capitulation, a stage where investors, including large holders, abandon positions rather than defend them. Such periods are often marked by extreme volatility, deep pessimism and collapsing confidence.
The prolonged decline has prompted renewed references to a crypto winter, defined by months of falling prices, low activity and waning belief in the asset class as a whole.
Warnings of further downside risks
Several forecasts suggest the sell off may not be complete. Some analysts see the possibility of bitcoin falling toward the mid 50,000 dollar range if current pressures persist.
Prominent investors have warned that a sustained move below 60,000 dollars could have serious consequences for companies with large bitcoin holdings on their balance sheets, potentially restricting access to capital markets and amplifying stress across the sector.
Ripple effects across crypto businesses
The price collapse is already affecting the wider crypto industry. Several firms have reported large losses, sharp declines in share prices and strategic pullbacks in operations as trading volumes fall.
Layoffs and cost cutting have returned, highlighting how prolonged price weakness quickly feeds through to the real economy surrounding digital assets, not just speculative markets.
A market searching for stability
Prediction markets now show rising odds that bitcoin could test significantly lower levels later this year, reflecting expectations that pressure may persist before any durable recovery takes shape.
The bitcoin bloodbath has done more than erase a politically driven rally. It has exposed, once again, how vulnerable the crypto market remains to shifts in global risk sentiment. The central question ahead is not only where prices may find a bottom, but whether confidence can be rebuilt in an asset class now facing another prolonged and painful downturn.
