Why is Bitcoin Crashing? Top Reasons Behind Major Price Drops

Bitcoin’s drop from its October peak at $126,000 to recent levels near $67,000-$68,000 represents a decline of almost 50%, marking one of the sharpest post-peak corrections of this cycle. The pullback has occurred despite pro-crypto political rhetoric, a US Strategic Bitcoin Reserve announcement, and a regulatory shift viewed as industry-friendly. So what is driving the downtrend?

Demand Momentum Has Weakened

The US-approved spot exchange-traded funds (ETFs) for Bitcoin created a new investment opportunity that drove the Bitcoin price in 2024. 

Bitcoin spot ETFs have grown their total assets by over $14 billion in the last year. BlackRock's iShares Bitcoin Trust (IBIT) alone pulled approximately $21 billion in assets. 

However, in the past three months, spot Bitcoin ETFs have experienced net asset withdrawals of around $5.8 billion, with $2.8 billion from IBIT alone. 

The market shows active long-term investments, but the pace of incoming capital has declined. 

Bitcoin’s market capitalization at its peak exceeded $2.4 trillion. Price growth at that level needs larger capital investments to maintain its upward trend.

When incremental buying slows, price momentum naturally fades.

Treasury Companies No Longer Amplifying Demand

Another structural driver during the rally was the rise of “digital asset treasury” companies. Strategy (formerly MicroStrategy) has accumulated more than $50 billion worth of Bitcoin, representing roughly 3% of total circulating supply.

Previously, these companies traded at premiums to their net Bitcoin holdings, allowing them to issue equity and purchase more BTC. 

Several treasury firms now trade near or below net asset value, reducing their ability to raise capital for additional purchases. This removes a key source of reflexive buying pressure.

Macro Liquidity Is Tightening

The Federal Reserve’s decision to keep rates unchanged in late January, alongside uncertainty around future rate cuts, reinforced a higher-for-longer interest rate environment. 

Historically, tighter liquidity weighs on risk assets, including crypto.

At the same time, gold has reached fresh highs, drawing capital toward traditional safe-haven assets. Bitcoin’s inability to rally alongside gold has weakened the “digital gold” narrative.

Not a Systemic Crisis Yet

Unlike the 2022 downturn triggered by the FTX collapse when Bitcoin fell below $16,000 there is no broad insolvency event driving the current correction. 

ETF infrastructure remains intact, and corporate holders have not signaled forced liquidations.

Also Read: Bitcoin Price Holds $68,000 Support While Facing Pressure at $70K

Conclusion

The current decline appears less about hidden crises and more about a fundamental reality: Bitcoin’s price depends on continuous capital inflows. With ETF demand slowing, treasury premiums fading, and liquidity tightening, upward momentum has stalled.

In a market built on accelerating participation, when “number go up” pauses, price can fall quickly even without a trigger.