What Caused the Recent Drop in Bitcoin Prices, and What Should We Expect Next? Here Are Expert Opinions and Data

Bitcoin fell below $95,000 for the first time in nearly six months, moving one step closer to erasing its year-long gains.

With the increasing risk aversion in global markets, investors have withdrawn approximately $900 million from their Bitcoin funds.

The price of BTC fell as much as 4.7% to $94,147 during the day. Bitcoin reached an all-time high of $126,251 in early October and closed 2024 at $93,714.

Demand for downside protection has surged in the options market over the past 24 hours. According to data from Deribit, which operates Coinbase, interest in put options at $85,000 and $90,000 has surpassed the $120,000 and $140,000 call options that have dominated the market this year. As Bitcoin has been racing to new highs for months, call options above $100,000 have become the most popular contracts.

Following the $19 billion in liquidations on October 10, $1 trillion was wiped from the total crypto market capitalization. Liquidations, particularly in long positions, accelerated throughout the week, while futures open interest has struggled to recover since the early October crash, according to Coinglass data.

CoinMarketCap’s fear and greed index is approaching the “extreme fear” zone, indicating that expectations for new selling waves in the market are strengthening.

Bitcoin-focused ETFs saw net outflows of approximately $870 million, the second-largest daily outflow since the products launched.

The brief optimism that emerged from the government shutdown in US stock markets earlier this week quickly faded. The postponement of key economic data calendars led investors to reassess their expectations for near-term Fed rate cuts.

“The current sell-off is entirely consistent with broader weakness in risk assets, but the severity of the decline is greater due to crypto’s volatility,” said Max Gokhman, Deputy CIO at Franklin Templeton.

Market depth has fallen by about 30 percent from its peak for the year, according to Kaiko data. This is causing large orders to have a more severe impact on price.

“Bitcoin has now turned negative since President Trump's inauguration. The overall crypto market cap is also back to its year-to-date level. There's no strong technical support visible below $90,000,” commented SignalPlus partner Augustine Fan.

Nick Ruck of LVRG Research noted that investors are increasingly turning to neutral volatility strategies like straddles and strangles.