"Fivefold Impact" Strikes Together! The logic behind this round of Bitcoin's plunge is completely different from the past.

Deutsche Bank believes the fundamental logic behind Bitcoin’s recent crash has changed.

According to the Chasing Wind Trading Desk, on November 24th, Deutsche Bank published a research report arguing that, unlike previous crashes mainly driven by retail speculation, the current downward adjustment in Bitcoin is the result of five simultaneous shocks: macroeconomic headwinds, hawkish signals from the Fed, stalled regulatory progress, institutional capital outflows, and profit-taking by long-term holders.

Data shows that Bitcoin has tumbled nearly 35% from a peak of around $125,000 in early October to around $80,000, wiping out about $1 trillion in total crypto market capitalization. This round of adjustment is no longer a single event within the crypto community, but rather a concentrated manifestation of Bitcoin’s risk asset attributes as it becomes increasingly integrated into the global macro financial system.

The report highlights that Bitcoin’s correlation with tech stocks has increased significantly, and its “digital gold” safe haven narrative is facing a severe test in the current environment. This signals a fundamental shift in Bitcoin’s investment logic, with risk management being elevated to unprecedented importance.

Shock #1: High Correlation Between Bitcoin and Tech Stocks

This Bitcoin decline occurred in tandem with U.S. equities and other risk assets, demonstrating that its function as a defensive hedging tool is yet to be established.

(Bitcoin market cap was the first to fall among various risk assets)

Deutsche Bank notes that, amid a U.S. government shutdown, renewed global trade tensions, and concerns over AI-related valuations, Bitcoin’s price action resembles a high-growth tech stock more than a standalone store of value.

Data shows that in 2025 so far, Bitcoin’s daily average correlation with the Nasdaq 100 index has reached 46%, and correlation with the S&P 500 index climbed to 42%.

(In recent weeks, Bitcoin’s correlation with the Nasdaq and S&P 500 has increased)

Both correlations have surged in recent weeks, reaching levels similar to the 2022 pandemic market stress period. As Bitcoin trades around the clock and has a higher beta, it typically leads the movements of the S&P 500 index.

In contrast, traditional safe-haven assets like gold and U.S. Treasuries have performed well recently.

For example, on October 10th, after the Trump administration announced tariff threats, Bitcoin fell 5.6%, while gold rose 1.03%, and the yield on 10-year U.S. Treasuries increased by 10.6 basis points.

Although gold dropped more than 3% from its mid-October peak, and the 10-year Treasury yield rose about 11 basis points from 3.95% since October 22nd, both outperformed Bitcoin by a wide margin.

Shock #2: Heightened Uncertainty in Monetary Policy Fuels Selloff

Market uncertainty over the Fed’s monetary policy trajectory is another key driver behind Bitcoin’s decline.

The report emphasizes the strong negative correlation between Bitcoin’s price and Federal Reserve interest rates.

For example, during the Fed’s rate hike cycle in 2022, the correlation was as high as -90%; in the rate cut cycle of 2020, the correlation was -27%, with rate cuts propelling Bitcoin prices upward.

Earlier in October, although the Fed cut rates by 25 basis points, when Chair Powell stated “a further rate cut in December isn’t guaranteed, far from it,” Bitcoin prices plunged.

Soon after, on November 4th, Fed Governor Cook reiterated that a December rate cut is not assured, causing Bitcoin to drop by more than 6%.

Year-to-date, the correlation between Bitcoin returns and Fed interest rates is -13%. This clearly shows that any signals of tightening monetary policy or pausing easing directly hit the liquidity-reliant Bitcoin market.

Shock #3: Key Regulatory Bills Stalled

In July, the U.S. House of Representatives approved the bipartisan Digital Asset Market CLARITY Act, establishing a framework for digital asset classification and designating the Commodity Futures Trading Commission (CFTC) as the leading industry regulator, sparking a widespread crypto rally.

However, momentum has stalled since summer.

The report notes that Republican Senator Tim Scott recently stated that, due to the previous U.S. government shutdown and bipartisan disputes over DeFi identity verification and anti-money laundering controls, the bill will not be signed by the Senate before 2026.

The stalled regulatory momentum directly impedes integration of Bitcoin into investment portfolios and deeper liquidity.

According to the report, as regulatory expectations cooled, Bitcoin volatility rebounded from an August low of 20% to 39%.

Meanwhile, Deutsche Bank data shows market adoption is stagnating, with U.S. retail crypto user adoption dropping from 17% in July to 15% in October. Google Trends data also shows diminishing global interest in Bitcoin.

(Changes in global search popularity for Bitcoin)

Shock #4: Institutional Capital Outflows & Liquidity Dry-Up

In this decline, the drying up of liquidity and outflow of institutional capital have created a vicious cycle.

The selloff on October 10th is a typical case. According to Kaiko Research, order book depth on major crypto exchanges dropped sharply that day, with sell-side liquidity vanishing for several minutes at times.

This liquidity gap magnified the impact of price declines and reduced market makers’ willingness to provide liquidity.

In contrast to earlier this year, when spot Bitcoin ETFs attracted billions of dollars in inflows, supporting market liquidity, the recent selloff triggered substantial institutional outflows.

Bloomberg data shows that U.S. spot Bitcoin ETFs have seen large single-day net outflows recently. This institutional withdrawal further exacerbated market selling pressure and liquidity crunch, leading to a roughly 24% drop in total crypto market capitalization since the October peak—over $1 trillion.

(Recently, Bitcoin ETFs have performed poorly)

Shock #5: Profit-Taking by Long-Term Holders

Unlike previous crypto crashes mainly driven by newcomers or leveraged traders, this round of adjustment saw long-term Bitcoin holders take profits.

The report cites blockchain data showing long-term holders sold over 800,000 Bitcoins in the past month—the highest level since January 2024.

Earlier this year, many long-term investors accumulated or held Bitcoin to weather volatility and support supply-demand dynamics. Glassnode data shows that as prices fell, multi-year holders reduced their positions, increasing circulating supply.

Meanwhile, rising Bitcoin volatility and a broader crypto decline kept many traders defensive.

The Crypto Fear and Greed Index dropped to 11 on November 21st—the lowest so far this year. Although Bitcoin is maturing, the recent pullback was enough to prompt even long-term holders to reduce risk, reinforcing the recent bearish momentum.

Bitcoin’s 30-day volatility has climbed again, now reaching 39%, though not yet at 2020 levels. Forced liquidations of leveraged positions during the selloff also intensified bearish sentiment.

(Bitcoin’s 30-day volatility is rising again, though still well below 2020 levels)

Conclusion: New-Type Adjustment Driven by Institutional Participation

Deutsche Bank believes it is still uncertain whether Bitcoin can stabilize after this adjustment. Looking ahead, Bitcoin’s inclusion in mainstream investment portfolios may continue in stages.

Recent regulatory reforms targeting crypto market structure are expected to provide a clearer policy framework, thereby boosting institutional investor confidence. At the same time, adoption of stablecoins by major financial institutions is expected to enhance overall market liquidity.

Additionally, governments and central banks are showing greater interest in digital currencies—recent initiatives by Luxembourg and the Czech Republic demonstrate increasing official involvement in the crypto market.

However, the report emphasizes that uncertainty and leverage effects may further amplify Bitcoin price volatility, so as the crypto market evolves, strict risk management measures are essential.

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