Since hitting a record high of $126,000 last fall, bitcoin has dropped to just above $60,000 amid waves of selling. That has erased more than $1.2 trillion in market cap in eight months and wiped out all gains across President Donald Trump’s second term.
On Friday, bitcoin touched its lowest level since just before Trump’s reelection in 2024.
It’s a stark shift from the start of Trump’s term, when expectations of a more crypto-friendly administration helped fuel a rally to record highs. Bitcoin hit $100,000 for the first time ever one month after the presidential election.
But sentiment has since changed. The cryptocurrency is down almost 30% this year and lower by more than 6% since Trump took office. Meanwhile, the S&P 500 is up nearly 10% this year and 30% since Trump’s second term started.
The eight-month malaise since bitcoin’s last record high has pushed some investors to sell their holdings, while others are reassessing the role crypto can play in a portfolio. BlackRock’s flagship bitcoin ETF saw daily net outflows every trading session from May 15 to June 3, according to data from Farside Investors.
Bitcoin rallied at the start of the war with Iran in late February, prompting analysts to consider whether it would regain its status as a kind of digital gold, or hedge against uncertainty. But the crypto has since given up those gains.
Meanwhile, US stocks rebounded from an initial war-related slump and have hit a string of record highs. Actual gold is flat this year but up 60% since Trump took office.
“I think bitcoin has lost the plot,” Mark Cuban, entrepreneur and “Shark Tank” investor, said on the “Front Office Sports” podcast in May. Cuban, who said he’s sold most of his holdings in the cryptocurrency, added: “It’s not the hedge that I expected it to be, and that was really disappointing.”
Bitcoin has yet to regain its footing since a flash crash on October 10 sparked billions of dollars in liquidations. Since the crash, bitcoin hasn’t recovered while other assets like stocks and gold have outperformed. A combination of other factors has since added to the pressure.
The broader crypto industry has felt the slump. Shares of Coinbase (COIN), a crypto exchange, are down about 30% this year.
Enthusiasm about artificial intelligence has ramped up in recent weeks, drawing focus away from cryptocurrencies, analysts say. The excitement surrounding mega IPOs like SpaceX, Elon Musk’s rocket and satellite company that also has an AI business, might be replacing the hype around crypto.
“A lot of speculative money may be selling bitcoin and chasing AI,” said Jonathan Bier, CEO at Farside Investors.
Another factor: Uncertainty about inflation and the Federal Reserve’s path for interest rates. Hot inflation reports and strong jobs data are prompting some traders and economists to shift expectations to higher rates for longer.
Nerves about higher rates and a more restrictive monetary environment are putting pressure on crypto, said Gerry O’Shea, head of global market insights at Hashdex Asset Management.
“Crypto tends to do better when there’s more liquidity in the system and a lower rate environment, and so there’s uncertainty around that,” O’Shea said.
During a downturn, traders who borrowed money to bet on bitcoin can have their positions automatically closed by exchanges if losses get too steep. These liquidations can exacerbate downturns, said Ryan Rasmussen, head of research at Bitwise Asset Management.
Nearly $2.5 billion worth of long positions on bitcoin were liquidated over a five-day period at the start of the month, according to CoinGlass data compiled by Bitwise.
Strategy (MSTR), a key bitcoin company, has also moved the market. The company purchases bitcoin, enabling its investors to get exposure to the asset. Strategy disclosed last week that it had sold 32 bitcoin, its first sale since 2022 — causing the cryptocurrency to drop more than 17%, its worst week since November 2022.
But Strategy on Monday reversed course and purchased 1,550 bitcoin, which sparked a rebound rally across the crypto industry.
While bitcoin has languished, other crypto coins have garnered attention: HYPE, a coin associated with the Hyperliquid crypto exchange, is up 150% this year, defying the downturn in crypto.
The biggest near-term catalyst for the cryptocurrency industry could be the CLARITY Act, which would lay out regulatory guidelines and help legitimize the crypto industry. The legislation is currently being debated on Capitol Hill.
The CLARITY Act would also usher in regulations for stablecoins, a type of cryptocurrency that is pegged to the dollar, as well as other coins like Ethereum.
If passed, the CLARITY Act could be a “catalyst” that drives up the value of cryptocurrencies, O’Shea at Hashdex said.
“Some of those folks out there who thought that crypto was dead will all of a sudden say, ‘Oh, wow, the US now has a law in place that’s going to help with investment capital in the space,’” O’Shea said.