Bitcoin price in freefall, weeks after hitting all-time high

Almost exactly one year after rising above $90,000 for the fist time in its history, bitcoin has fallen back to that level after suffering a severe price crash.

A record-breaking rally took the cryptocurrency to a new all-time high above $125,000 last month, with some market analysts fearing the sudden drop could be the beginning of a more sustained bear market.

Bitcoin was trading at $93,000 on Monday morning, marking a 25 per cent decrease over the last six weeks. Previous price cycles have seen bitcoin lose around 75 per cent of its value after hitting a record high.

“Bitcoin’s pullback below $100,000 may unsettle short-term traders or those newer to the asset class,” Gadi Chait, an investment manager at Xapo Bank, told The Independent. “Those who have been in the space for years recognise this pattern: we’ve seen it before, and we’ll see it again.”

The latest collapse can be attributed to a range of factors, according to Mr Chait, including investors cashing in profits and adjusting their exposure to the market.

Other cryptocurrencies have seen even bigger losses in recent weeks, with Ethereum (ETH) and Solana (SOL) dropping by around a third since the start of October. Overall, the crypto market is down by more than $1 trillion over that period, marking the steepest drop in its history over that timeframe.

The impact of Trump

The November 2024 crypto rally was fuelled by Donald Trump’s victory in the US elections. Having positioned himself as the first ever “crypto president”, he pledged to introduce favourable regulation and set up a bitcoin treasury.

He has stood by some of his promises – although not to the extent that some would have hoped – but his other policies have caused chaos among financial markets.

Shortly after bitcoin hit a new all-time high in early October, Trump announced that the US would impose new tariffs of 100 per cent on Chinese imports. It triggered the largest liquidation in the history of cryptocurrency, with half a trillion dollars wiped from the market in the space of just a few hours.

The sell-off impacted more than 1.6 million traders, according to figures from crypto analytics firm CoinGlass, while Trump’s own meme coin fell to around 10 per cent of its peak price.

Despite Trump standing down from his tariff threats in late October, the crypto market is yet to show signs of recovery.

A bitcoin ‘Santa rally’?

Some market analysts believe the latest sudden price correction could actually serve as a buying opportunity that will fuel short-term gains for the cryptocurrency.

“When the dust settles, the blend of lower prices, stronger hands and ongoing adoption becomes highly compelling,” said Nigel Green, chief executive of financial advisory firm deVere Group.

“Volatility of this magnitude always provokes anxiety, but it also exposes value. This moment demands perspective, not panic… Every major correction in bitcoin’s history has opened the door to substantial upside for patient investors. This cycle is likely to be no exception.”

Investors are currently looking to events in the US to see whether this potential recovery will unfold. One factor that could drive up prices could be the “tariff dividend” proposed by President Trump that would see each citizen pair $2,000. When similar one-off payments were made during the Covid pandemic, the price of bitcoin shot up as some chose to spend their cheques on cryptocurrency.

A decision on interest rates next month at the Federal Open Market Committee (FOMC) meeting is also likely to impact bitcoin’s future price trajectory. Should rates be cut, as they were in September in the run up to the record price highs, investors may once again look towards more high-risk assets like bitcoin and other cryptocurrencies.

“The crypto market has been struggling to regain momentum since October’s pandemonium, and bitcoin appears to be fighting one battle after another, dragged down by US dollar strength and higher Treasury yields, long-term holders selling, and macro uncertainty,” said Nic Puckrin, a crypto analyst at The Coin Bureau.

“It’s unsettling to see crypto and tech stocks diverging when they typically move in lockstep. This dynamic shows that bitcoin isn’t just a proxy for the Nasdaq. It’s more sensitive to macro headwinds and liquidity concerns, but it is also perfectly positioned to break out once those concerns dissipate.

“The real test will be the FOMC’s interest rate decision on 10 December, but it remains likely that the news will be positive, which could set the stage for a Santa rally in crypto and other risk assets.”