The great 8-month Bitcoin crash

Picture Credit: Reuters

Bitcoin has fallen sharply from its record high of $126,000 reached last fall, dropping to just above $60,000 and wiping out more than $1.2 trillion in market value over the past eight months. The decline has erased all of the cryptocurrency’s gains made during President Donald Trump’s second term and has left many investors questioning whether bitcoin can still serve as a reliable hedge against economic uncertainty.

The cryptocurrency initially surged following Trump’s re-election in 2024, driven by expectations that a more crypto-friendly administration would support the industry. Bitcoin crossed the $100,000 mark for the first time just a month after the election. However, sentiment has shifted dramatically. Bitcoin is now down nearly 30 per cent this year and has underperformed traditional markets, while the S&P 500 has gained close to 10 per cent in 2026 and continues to trade near record highs.

The prolonged downturn has triggered a wave of selling across the crypto sector. BlackRock’s flagship Bitcoin ETF recorded daily net outflows for several weeks, while major crypto exchange Coinbase has seen its shares fall by roughly 30 per cent this year. Some investors who once viewed bitcoin as "digital gold" have become increasingly sceptical after the cryptocurrency failed to hold onto gains made during the early stages of the Iran conflict. In contrast, US stocks recovered quickly from war related volatility, while gold has remained relatively stable.

Analysts point to several factors behind bitcoin’s weakness. Growing enthusiasm for artificial intelligence has attracted investor capital that previously flowed into cryptocurrencies. Major technology developments and highly anticipated listings such as SpaceX's upcoming IPO have shifted attention toward AI-driven growth opportunities. At the same time, stronger than expected US economic data has increased expectations that interest rates could remain elevated for longer, reducing the appeal of riskier assets like cryptocurrencies.

Despite the recent slump, industry supporters remain optimistic about the long-term outlook. A key focus is the proposed CLARITY Act in the United States, which would establish clearer regulatory guidelines for cryptocurrencies and stablecoins. Supporters believe the legislation could boost investor confidence and attract new capital into the sector. While bitcoin faces significant challenges in the short term, many market participants view regulatory clarity as a potential catalyst that could help revive the broader cryptocurrency market in the years ahead.