The cyclical and somewhat volatile nature of cryptocurrency is well-established; part of the reason why people convert fiat currency into crypto is as a means of investment to capitalise on the good times when they arrive.
Throughout most of 2025, there has been a lot to celebrate amidst a wave of institutional moves that have brought blockchain assets closer to the rest of the financial market, a move initially spearheaded by the approval of Bitcoin ETFs.
Alongside the adoption by traditional finance, this included more friendly legislation, a rationalisation of regulations that were impeding the potential for the sector to grow and a planned digital asset treasury that saw the price of Bitcoin break the $100,000 threshold.
Not long after Halloween, however, Bitcoin entered a remarkable dip, losing a fifth of its value in November alone, which is over a third down from its all-time high of $126,000 and has faced its worst losses since the almost-catastrophic events of 2022 that saw the collapse of FTX and other major crypto institutions.
Why did it happen? Should investors be worried? What are the long-term impacts of what appears to be an ongoing selloff? And what does all of this represent for a market that was designed to be an alternative, insulated from the rest of traditional finance?
Why Did Bitcoin Plummet In Value?
It is easy to reduce the drop from a high of $126,000 to $82,000 as a typical marker of the volatility of crypto, and the calls to “buy the dip” have been as loud as ever amongst evangelists.
After all, this is not the first market downturn in 2025, and as of the end of November, it is not even the worst; Bitcoin fell below $80,000 in March in the wake of harsh criticisms of the United States’ Digital Asset Stockpile plans, according to the BBC.
A big part of this is holders cashing out of the market following a gigantic peak, particularly in the wake of a weaker economic outlook more broadly, which traditionally leads to a flight to quality towards bonds and gold commodities.
However, one aspect that does seem to be somewhat different is sentiment and narrative, both of which have created concerns that this may not be a short-term dip or a natural element of crypto’s volatility, but a sign of a wider market trend.
Should Investors Be Concerned?
With the markets somewhat concerned about other stocks, such as those in AI companies, being overvalued, a market correction could send ripples throughout the entire economy and create a major test for Bitcoin as a resilient store of value.
Historically, it has correlated very closely with the NASDAQ 100 and not with gold or low-yield bonds, seen as “safe” investments during periods of financial strife.
Instead, crypto has been treated by the market as more akin to a technology stock; it is a high-risk, high-reward asset that is prone to periods of boom and bust outside of favourable low-interest market conditions.
Much of the surge in Bitcoin’s price was predicated on an interest rate cut in the United States, something that ultimately became impossible due to various policies coming into effect and driving inflation.
This had a ripple effect on the technology sector, with the market surrounding Nvidia and the AI boom starting to be increasingly seen as overvalued. Softbank led the way in selling its entire stake in Nvidia, often a signpost of a peaking stock.
This, alongside difficulties in passing the Clarity Act and the fact that the US Bitcoin Reserve will not involve buying additional Bitcoin from the market, has created ripples and tides that have affected what appeared to be smooth sailing.
What Does This Mean For The Integration Between Crypto And The Financial Market?
Ironically, one of the biggest drivers of the Bitcoin boom has also accelerated the crash in some respects, as fundamental analysis, technical analysis and narratives all fell at roughly the same time.
When Bitcoin fell below $90,000, that forced a lot of risk management systems from major investment funds to automatically sell, which turned what were institutional protections that helped Bitcoin to soar into fuel for what has become a remarkably destructive fire.
What Are The Long-Term Impacts?
At present, whilst there has been a rally from the lows of $80,000 to $90,000, the recovery has been a lot slower than a lot of analysts have expected, and without a change in institutional policy that unlocks additional liquidity, both investors and miners will begin to struggle.
This can be an opportunity to buy the dip, but at the same time, it could also be the sign of a knife that still has some way to fall.