Why the value of Bitcoin is plunging

The price of bitcoin has significantly decreased since it reached unprecedented levels last month, briefly dropping below $90,000 on Tuesday, in contrast to over $126,000 at the beginning of October.

Below, AFP elucidates the reasons behind investors' withdrawal from this volatile asset.

– What has triggered the recent price decline? –
Before the current downturn, bitcoin had achieved a succession of record highs following Donald Trump’s return to the presidency. The US president expressed strong support for cryptocurrencies ahead of his re-election and has maintained this stance.

Bitcoin first exceeded $100,000 in May, eventually reaching its most recent peak of approximately $126,251 last month.

Support also stemmed from anticipations of an interest-rate reduction by the Federal Reserve, prompted by disappointing US employment data, which negatively impacted the dollar.

However, after Trump rekindled concerns regarding a trade conflict with China last month, investors opted for safer assets instead of volatile cryptocurrencies.

Those who had speculated on bitcoin's continued ascent incurred substantial losses.

According to Rachael Lucas, a cryptocurrency analyst at BTC Market, $20 billion worth of bitcoin trades were liquidated.

– What is causing the decline in bitcoin’s price? –
Bitcoin experienced a loss of one quarter of its value from the early October record to its fall below $90,000 on Tuesday.

Other cryptocurrencies also saw declines on Tuesday, including Dogecoin, the speculative digital token endorsed by Elon Musk.

All assets considered less secure, such as stocks, are facing downturns in financial markets following the longest US government shutdown on record, which hindered the release of crucial economic data.

Such data is regarded as essential for understanding the extent to which the Fed might further reduce interest rates in the upcoming months to stimulate the economy.

Simultaneously, some Federal Reserve officials have suggested that a rate cut may not take place at the US central bank’s next monetary policy meeting in December.

This has boosted the dollar, while hitting stock markets and bitcoin.

“Renewed expectations from the market for a rate cut in December on the back of some favourable economic data could quickly cause (bitcoin and other) prices to reverse and rally again very quickly,” Simon Peters of brokers eToro told AFP.

– Where does bitcoin go from here? –
John Plassard, head of investment strategy at private bank Cite Gestion, said the current “disenchantment reflects a deeper reality” — that individuals have been left feeling “wary” by previous price plunges, particularly of cryptocurrencies viewed even more speculative than bitcoin.

According to Thomas Probst of crypto data analysts Kaiko, the sector’s volatility remains “an obstacle” to cryptocurrencies’ “widespread adoption at both the individual and institutional levels”.

Simultaneously, cryptocurrencies have gained from the increasing interest of institutions and the receptiveness of regulators — not just in the United States.

The European Union has implemented its own regulatory framework with the MiCA regulation, which came into effect at the end of the previous year.

London is anticipated to introduce its own regulations sometime in 2026.

Established in the aftermath of the 2008 global financial crisis, bitcoin originally championed a libertarian ideal and aimed to disrupt conventional monetary and financial institutions, including central banks.

The original white paper, released on October 31, 2008, was authored by Satoshi Nakamoto, a pseudonym whose true identity remains a mystery.