Cryptocurrency bear market returns: One month erases yearly gains, total market value plunges 20% from peak

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The cryptocurrency market has erased almost an entire year’s worth of gains in just over a month, a sharp reversal that has caught investors optimistic about digital assets at the start of the year off guard.

Latest data shows that the total market capitalization of cryptocurrencies has plunged 20% from the $4.4 trillion peak set on October 6, with year-to-date gains now only at 2.5%. This rapid decline began with the sudden liquidation of around $19 billion in leveraged positions, severely undermining market confidence.

Bitcoin has fallen 8% this week, on track for its worst weekly performance since March, and has breached the crucial 200-day moving average support level, which it had held since the 2022 bear market. Even more striking, the total market value of digital assets is now below the level when Trump took office, despite his previous moves to position the US as a global cryptocurrency hub.

Market participants warn that, in the absence of near-term catalysts and with persistent concerns over security and regulation, mainstream fund participation may remain weak. However, after six consecutive trading days of net outflows, US spot Bitcoin and Ethereum ETFs recorded a net inflow of $253 million on Thursday, showing some signs of stabilization.

Leverage Liquidation Triggers Chain Reaction

This downturn originated from large-scale leverage position liquidations in early October.

According to CoinGecko, the total market capitalization of cryptocurrencies hit a historic high near $4.4 trillion on October 6, and then started to plummet rapidly. About $19 billion of leveraged positions were suddenly liquidated within days after reaching the new high, triggering a collapse in market confidence.

This performance shocked the market because 2025 was originally expected to be a year where regulators, global banks, and institutional investors more closely embrace digital assets. Trump’s push to make the US a global cryptocurrency hub once sparked a wave of activity, driving Bitcoin up by as much as 35%.

However, the speed of the sentiment reversal has been staggering. The market capitalization of digital assets is now lower than it was when Trump took office, highlighting the extreme volatility of the cryptocurrency market.

It's noteworthy that, while the recent cryptocurrency sell-off has been widespread, the steepest drops have been concentrated in altcoins—smaller, more volatile tokens that have fared significantly worse this year.

SignalPlus partner Augustine Fan said:

"Except for Bitcoin and Ethereum, cryptocurrencies have largely been at a disadvantage for months. Very little new capital is flowing into altcoins or DeFi projects."

Fan added that, in the absence of near-term catalysts and with ongoing safety and regulatory concerns, mainstream participation may continue to be weak. This divergence suggests that even when the overall market is under pressure, investors still prefer to allocate funds to relatively mature mainstream digital assets.

AI Stock Valuation Concerns Spill Over to Crypto Market

Jeff Mei, COO of crypto exchange BTSE, believes that the latest decline in digital assets is partly driven by "concerns over the severe overvaluation of AI stocks." He warns:

"If we see a sell-off in AI and tech stocks, Bitcoin is very likely to fall below the $100,000 mark, and altcoins could drop even further."

This view highlights the growing correlation between cryptocurrencies and traditional tech stocks. As institutional investors increase their allocation to digital assets, the crypto market is increasingly susceptible to broader changes in market sentiment and risk appetite.

Concerns over the high valuations of AI-related stocks are spreading to the entire tech sector, putting pressure on cryptocurrencies, which are seen as risk assets. This cross-market transmission effect shows that digital assets are no longer a completely independent investment category.

ETF Fund Flows Show Signs of Stabilization

Despite the overall gloomy market performance, there have been some signs of stabilization. According to Bloomberg, after six consecutive trading days of net outflows, US spot Bitcoin and Ethereum ETFs recorded a net inflow of $253 million on Thursday.

This shift in fund flows may indicate that some institutional investors are beginning to see current price levels as a good opportunity to build positions. As a key channel for traditional investors to participate in the cryptocurrency market, flows into ETFs often reflect changes in institutional investor sentiment.

However, whether single-day inflows can be sustained remains to be seen. Market participants generally believe that, in the absence of clear favorable catalysts, the cryptocurrency market may continue to face pressure.

Risk Warning and DisclaimerThe market carries risks, investment should be cautious. This article does not constitute personal investment advice and does not take into account individual users’ specific investment objectives, financial circumstances, or needs. Users should consider whether any opinions, viewpoints, or conclusions herein are appropriate to their own situations. Investments made accordingly are at your own risk. ```