Bitcoin crash stuns markets. Decoding biggest crypto slump since Trump election

Bitcoin, the world’s largest cryptocurrency, has suffered a sharp sell-off, dragging the broader crypto market into one of its deepest single-day declines in years. More than $2.12 trillion in market value was wiped out globally, with Bitcoin being the biggest loser amid other digital currencies.

This slump makes it the biggest correction since the period following Donald Trump’s election, a time when global markets were adjusting to political and regulatory uncertainty.

While Bitcoin has seen several cycles of sharp rises and falls since 2021, the current slump of around 15-20 per cent stands out due to the size of the market today and the scale of institutional participation.

At its lowest point of around $60,000, Bitcoin slipped to levels not seen in over a year, pulling down major cryptocurrencies such as Ether and Solana. Crypto-linked stocks and funds also came under pressure, reflecting the interconnected nature of today’s digital asset ecosystem.

But why the sudden decline? What could be the primary drivers affecting this slump? Let’s dive in.

WHAT TRIGGERED THE SUDDEN SELL-OFF?

Market experts say the slump cannot be attributed to a single event. Instead, it is expected to be due to multiple global and market-specific factors converging at once.

GLOBAL MARKETS REACT

The most significant driver is a broader shift in investor sentiment. Global markets are currently in a risk-off phase, with investors reducing exposure to high-risk assets amid concerns over economic growth, interest rates, and monetary policy.

In such environments, assets like cryptocurrencies tend to face sharper corrections. Bitcoin, despite its growing mainstream acceptance, is still widely viewed as a speculative investment and remains sensitive to changes in liquidity and investor confidence.

Weakness in global equities, particularly in the technology sector, seems to have further added to the pressure, reinforcing the sell-off in crypto markets.

INSTITUTIONAL INVESTORS STEP BACK

Another key factor has been the selling by institutional investors, who now play a much larger role in the crypto market than in previous cycles.

A CoinShares report showed sustained outflows from Bitcoin-linked investment products, including ETFs (Exchange-Traded Funds). As large investors exit positions, market liquidity tightens, leading to sharper price swings and increased volatility.

This marks a shift from earlier crypto downturns, which were largely driven by retail panic. Today, institutional positioning has become a critical determinant of market direction.

Bitcoin had been trading near important technical support levels for several weeks. Once these levels were breached, automatic selling and liquidation of leveraged positions accelerated the decline.

According to Ashish Singhal, Co-founder, CoinSwitch, “one of the main reasons behind the recent drop in crypto was massive liquidations in the futures market, with over $700 million worth of positions liquidated in the last 24 hours. Many traders were using high leverage, and even a slight slip in Bitcoin triggered automatic liquidations, creating a chain reaction of selling that pushed prices lower within minutes.”

Such liquidation cascades are common in crypto markets, where leverage remains high. As prices fall, margin calls force traders to sell, pushing prices lower and amplifying losses in a short span of time.

MACROECONOMIC AND POLICY CONCERNS

Uncertainty around global monetary policy has also weighed heavily on investor sentiment. Expectations of tighter financial conditions and concerns over inflation and interest rates have reduced appetite for speculative assets.

Cryptocurrencies, which benefited from easy liquidity in recent years, are now facing the other side of that cycle.

A TECH AND AI LINK?

The current downturn has highlighted Bitcoin’s growing correlation with technology and AI-driven stocks.

During the AI-led rally of the past two years, cryptocurrencies and tech stocks often moved in tandem, driven by investor enthusiasm for high-growth themes. As valuations in the tech sector correct and investors reassess risk, crypto assets have followed a similar trajectory.

"The sell-off was further influenced by an unwind in AI-linked equities amid growing doubts over the profitability of heavy capex spending, alongside weaker-than-expected U.S. labour market data that pushed bond yields lower," Ashish added.

This marks a change from Bitcoin’s earlier behaviour, when it often moved independently of traditional markets. Today, Bitcoin appears increasingly embedded within the broader risk asset universe.

INVESTOR RESPONSE: PANIC SELLING OR STRATEGIC BUYING?

The sharp fall has understandably unsettled investors, triggering heavy selling and negative sentiment across markets. Trading volumes surged as prices declined, reflecting fear-driven exits by some participants.

However, market observers note that not all investors are fleeing. Long-term holders and high-conviction investors are selectively accumulating Bitcoin at lower levels, betting that prices could stabilise once macroeconomic conditions improve.

Serial crypto investor Michael Saylor, who suffered a massive loss, is still urging crypto investors to hold on and have faith for a comeback.

This divergence in behaviour suggests the market is undergoing a phase of rebalancing rather than collapse.

WHAT DOES THIS MEAN FOR CRYPTO?

In the near term, the slump is likely to impact crypto businesses, including exchanges, trading platforms, and blockchain startups. Lower trading volumes and reduced investor activity could put pressure on revenues and funding.

At the same time, such corrections often lead to a more disciplined market environment, where speculative excesses are reduced, and focus shifts towards sustainability and regulation.

Speaking to Avinash Shekhar, Co-founder, and CEO, Pi42, India Today learned that despite the severity of the correction and fragile sentiment, the $58,000–$60,000 support band remains technically significant as of now, and a stable hold in this region could gradually restore confidence and open the door to a measured recovery, with bargain buying potentially emerging if volatility eases.

Bitcoin has experienced multiple sharp corrections over the years. However, the current slump stands out due to:

• The scale of institutional participation

• Strong links to global equity and tech markets

• The sheer size of value erased in a short time

Unlike past crashes driven by internal crypto failures, this downturn appears closely tied to global financial conditions.

Yes, smaller businesses will be affected. This will also weed out some of the units with weaker sustainable fundamentals and could be a silver lining for the future of this industry.

India remains one of the world’s most active crypto markets, with a large base of retail investors and a growing ecosystem of exchanges and developers.

INDIAN INVESTOR SENTIMENT

The global sell-off has affected sentiment in India as well, particularly among new and short-term investors. However, early indicators suggest that many investors are adopting a wait-and-watch approach rather than exiting the market entirely.

Some market participants are using the correction to gradually build positions, viewing the downturn as part of a long-term cycle. Compared to earlier crypto crashes, the reaction in India appears more measured. Investors are paying closer attention to risk management, global cues, and regulatory developments.

This suggests that India’s crypto market, while still volatile, may be gradually maturing.

TREAD WITH CAUTION

Bitcoin’s steep fall serves as a reminder that cryptocurrencies remain highly sensitive to shifts in global sentiment. As digital assets become more mainstream, they are also becoming more exposed to traditional market forces.

Whether this correction marks a temporary pause or a longer period of consolidation will depend on macroeconomic trends, institutional behaviour, and investor confidence in the months ahead.

For now, volatility remains an integral part of the crypto story.

(Disclaimer: The information provided in this article is for informational and educational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency markets are highly volatile and speculative; past performance is not indicative of future results. We recommend consulting with a certified financial advisor before making any investment decisions. India Today and its authors are not liable for any financial losses incurred.)