In a dramatic turn of events, Bitcoin has experienced a significant decline, reaching its lowest point in over a year and erasing billions from the global cryptocurrency market. On Thursday, Bitcoin’s price dipped below the £70,000 mark, a level not seen since November 2024, following the election of Donald Trump as President and his subsequent endorsement of cryptocurrency. The downturn, which has left investors reeling, has raised questions about the future of digital currencies in an increasingly volatile financial landscape.
The Current State of Bitcoin and Ethereum
The recent slump in Bitcoin’s value has been staggering, with the cryptocurrency dropping nearly 8% this week alone. This decline has contributed to an overall decrease of approximately 20% for the year thus far. Ethereum hasn’t fared much better, with its price falling to around £2,090—down nearly 30% in 2026. The broader implications for the crypto market are significant, as the total market capitalisation has plummeted by nearly $1.9 trillion since its peak of $4.379 trillion in early October.
Factors Behind the Decline
Analysts attribute the current downturn to the nomination of Kevin Warsh as the next Federal Reserve Chair. Speculation is rife that Warsh will implement policies aimed at reducing the Fed’s balance sheet, which has historically been a boon for speculative assets like cryptocurrencies. “The market fears a hawk with him,” stated Manuel Villegas Franceschi from Julius Baer’s research team. A tighter monetary policy could spell trouble for crypto, as liquidity has been a significant driver of its price increases in recent years.
Deutsche Bank analysts have noted that institutional investors appear to be pulling back, with substantial withdrawals from Bitcoin exchange-traded funds (ETFs). January alone saw outflows exceeding $3 billion, following a staggering $9 billion in the previous two months. This trend suggests a waning interest from traditional investors and a growing pessimism surrounding the cryptocurrency sector.
The Ripple Effect on Tech Stocks
Bitcoin’s fortunes have long been intertwined with the performance of the technology sector, particularly as investor enthusiasm for artificial intelligence surged. However, the recent sell-off in global software stocks has exacerbated Bitcoin’s decline, creating a feedback loop that threatens to deepen the market’s woes. Market analysts are voicing concerns that if prices continue to slide, forced liquidations among crypto miners could trigger a more severe downturn, creating a vicious cycle of losses.
Why it Matters
The current turmoil in the cryptocurrency market underscores the fragility of digital assets amidst shifting economic policies and investor sentiment. As billions are wiped from market valuations, the implications for retail investors and the broader economy are profound. This latest downturn serves as a stark reminder of the volatility inherent in cryptocurrencies, highlighting the need for caution among investors navigating this unpredictable landscape. As the dust settles, it remains to be seen how the market will adjust to these seismic shifts and what the future holds for one of the most polarising asset classes of our time.
