Bitcoin Plunges Below Election Levels as Risk Aversion Grows
Bitcoin has dropped below $71,000, adding to a week of losses that have wiped out all of its gains since United States President Donald Trump's re-election in 2024 (ALJAZEERA). The world's most popular cryptocurrency fell more than 7 percent on Thursday, continuing a steep downward slide that began in mid-January (ALJAZEERA). Bitcoin was trading at about $70,900 as of 04:30 GMT, marking a significant reversal from its previous upward trajectory (ALJAZEERA). Bitcoin tends to track other risk assets, and gold and silver have been behaving less like safe havens and more like momentum stocks in recent weeks (MARKETS).
The token is deep in a bear market, down as much as 37% from its October peak, briefly dropping below $75,000 on Monday before edging back up to around $78,500 (MARKETS). Bitcoin has fallen to its lowest level since before the 2024 election, erasing the substantial gains it had accumulated following Trump's victory (MARKETS). The price of bitcoin plummeted about 10% over the past week, reflecting growing investor concerns about the broader economic environment (ABCNEWS).
"There are concerns about risk right now. The price of crypto tends to drop when investors look to take risk off the table," said Bryan Armour, director of passive strategies research at Morningstar (ABCNEWS). This sentiment has been echoed across financial markets as investors reassess their positions in light of recent economic and political developments.
The world's most popular cryptocurrency, Bitcoin, has fallen nearly 20 percent in value since the start of 2026, indicating a significant shift in market sentiment (ALJAZEERA). Bitcoin has fallen in each of the last four months, achieving that feat for the first time since the pandemic (ABCNEWS). This consistent downward trend suggests a fundamental reassessment of cryptocurrency valuations rather than a temporary market correction.
From Election Euphoria to Market Reality
The price of bitcoin surged more than 40% in late-2024 after the election of President Donald Trump, who voiced support for cryptocurrency (ABCNEWS). In 2024, Trump campaigned on making the US the "crypto capital of the world," promising crypto-friendly regulation and the creation of a strategic bitcoin reserve (MARKETS). Bitcoin and other digital currencies racked up explosive gains after President Trump's re-election raised expectations of Washington adopting a light touch to regulating digital assets after years of regulatory crackdowns (ALJAZEERA).
Bitcoin hit $100,000 for the first time in December 2024 and breached that level again in February and May 2025, but the asset has largely been on a downward trajectory since October, when it hit an all-time high of more than $127,000 (ALJAZEERA). Bitcoin declined over the ensuing months but soared again in October 2025 (ABCNEWS). The enthusiasm has since waned and the regulatory bonanza seems to have been fully digested by markets while other more bearish factors have played into its price (MARKETS).
"Every bubble needs a pin to pop it and the nomination of Kevin Warsh to replace Jerome Powell as Fed Chair was the prick this time," said Kyle Rodda, senior financial market analyst at Capital.com (MARKETS). While Trump's appointment of Kevin Warsh to lead the Fed initially seemed positive for cryptocurrency markets, Warsh has historically favored a more hawkish policy despite calling for lower rates since Trump's election (MARKETS).
Broader Market Impacts and Liquidations
Equities and commodities markets also saw losses on Thursday, with silver dropping as much as 16 percent and benchmark stock indexes in Hong Kong and Japan down about 1.3 percent and 0.7 percent, respectively (ALJAZEERA). The breakdown in their price on Friday was the latest factor to weigh on crypto (MARKETS). Bitcoin and other risk assets like growth stocks tend to thrive in low-rate, easy-money environments (MARKETS).
January 30 was the 10th largest liquidation event in bitcoin's history, with $2.5 billion in positions sold (MARKETS). Even more dramatically, October 10, 2025's liquidation — right at the start of the current bitcoin bear market — was the largest ever, at $19.1 billion (MARKETS). These massive liquidations have contributed significantly to bitcoin's price decline and market volatility.
"Given the build up of positioning and leverage involved, the sell-off is bleeding into other markets. Effectively, a deleveraging is happening, forcing traders to sell other assets to cover losses on their losing precious metals positions. That's contributing to the sell-off in stocks and probably contributed to Bitcoin's plunge over the weekend," explained Kyle Rodda, senior financial market analyst at Capital.com (MARKETS).
Regulatory Uncertainty and Political Factors
Shortly after taking office, Trump announced the establishment of a strategic crypto reserve that would include Bitcoin and four other cryptocurrencies (ALJAZEERA). Trump had pledged to turn the US into the world's cryptocurrency capital during his re-election campaign, and launched his own crypto firm, World Liberty Financial, along with his sons, before winning the vote (ALJAZEERA).
However, a Trump-backed bill to regulate the trading of cryptocurrency has stalled in the US Senate amid disagreement between banks and cryptocurrency firms, casting doubt over the industry (ALJAZEERA). US Democratic Party lawmaker Ro Khanna said on Wednesday that he would investigate World Liberty Financial after The Wall Street Journal newspaper reported that representatives of an Abu Dhabi official signed a $500m deal to buy a 49 percent stake in Trump's fledgling cryptocurrency venture (ALJAZEERA).
These regulatory uncertainties, combined with broader economic concerns, have contributed to the bearish sentiment in cryptocurrency markets. Speed bumps like trade wars, a sluggish labor market, and government shutdowns have made investors wary of riskier assets (MARKETS). Trump has threatened tariffs against Canada, South Korea and eight European countries, invoking the tool as means of exerting pressure over a range of foreign-policy issues (ABCNEWS).
Bitcoin's Performance Relative to Other Assets
Bitcoin stands about 40% below a peak attained in October 2025, while the S&P 500 climbed 5% and the price of gold jumped 17% over that same period (ABCNEWS). This divergence in performance highlights the increased volatility and risk associated with cryptocurrency investments compared to traditional asset classes.
Ethereum, the second-largest cryptocurrency, plunged even further, shedding nearly one-fifth of its value over the last week (ABCNEWS). Solana, another popular crypto coin, saw its price cut in half over that period (ABCNEWS). These declines across the cryptocurrency market suggest a broad-based reassessment of digital asset valuations rather than issues specific to Bitcoin.
Despite the recent downturn, over the past five years, the price of bitcoin has soared 96%, outpacing an 80% gain in the S&P 500 over that period (ABCNEWS). This long-term performance demonstrates the potential for significant returns from cryptocurrency investments, albeit with substantial volatility and risk.
Economic Backdrop and Market Integration
The labor market has slowed in recent months, while inflation has hovered above the Federal Reserve's target rate of 2% (ABCNEWS). These economic factors have contributed to a more cautious approach from investors, particularly regarding speculative assets like cryptocurrencies.
The rise of bitcoin ETFs -- exchange-traded funds -- brought crypto deeper into traditional finance over the past two years, since such investment vehicles have allowed customers at large brokers to invest in crypto without holding the underlying asset (ABCNEWS). This integration with traditional finance has increased the correlation between cryptocurrency markets and broader financial markets, making Bitcoin more susceptible to macroeconomic factors and risk sentiment.
"There's a natural limit to how high it can go up," noted Steve Sosnick, chief strategist at Interactive Brokers (ABCNEWS). This perspective reflects a growing recognition of the constraints on cryptocurrency valuations, particularly as the market matures and becomes more integrated with traditional finance.
"Everything that's been happening the last few weeks is definitely adding a lot of nervousness in the market. Anything that makes investors risk averse of course affects the price of bitcoin," explained Christian Catalini, founder of the MIT Cryptoeconomics Lab (ABCNEWS). This observation underscores the sensitivity of cryptocurrency markets to broader economic and political developments, highlighting the challenges facing investors in this volatile asset class.