5 Reasons Why Bitcoin Crashed—And Why It Could Fall Further: Deutsche Bank

Bitcoin price weakness over the past six weeks has been caused by broad risk-off investor sentiment, a hawkish Federal Reserve, the stalled CLARITY Act, waning institutional interest, and long-term holders taking profits, according to Deutsche Bank.

Deutsche analysts were hesitant to predict a rebound for the asset.

“Whether Bitcoin stabilizes after this correction remains uncertain,” the bank’s analysts wrote in a note shared with Decrypt. “Unlike prior crashes, driven primarily by retail speculation, this year’s downturn has occurred amid substantial institutional participation, policy developments, and global macro trends.”

In the report, analysts detailed what they saw as five key reasons why Bitcoin fell last week:

• Declining risk-off sentiment: Bitcoin has fallen much like tech stocks and other risk assets in recent weeks amid macro concerns, Trump’s ever-volatile trade war, and fears that AI company valuations are overblown.
• Fed hawkishness: Bitcoin typically performs best in a low interest rate environment, and with the Fed giving mixed signals over the prospect of a third rate cut in December, it may be dinging BTC’s price.
• A lack of CLARITY: After a successful push to pass the GENIUS Act stablecoin bill earlier this year, efforts to get the CLARITY Act—a market structure bill—have stalled in recent months. That could be impacting crypto adoption.
• Institutional slowdown: After October 10’s record-breaking day of $19 billion in liquidations, institutional investors have been pulling out of crypto. Dwindling liquidity has made it more difficult for crypto prices to recover, the analysts said.
• Holders are taking profits: After Bitcoin peaked above $126,000 last month, long-term holders have been cashing out, dumping some 800,000 BTC in the last month—the biggest such move since January 2024.

Since early October, Bitcoin has plummeted from $126,000 to below $82,200, according to crypto price aggregator CoinGecko. At the time of writing, Bitcoin had rebounded to nearly $88,500 after having gained 1.8% in the past day.

But the broader picture remains troubling. Nearly $5 billion has left Bitcoin and other crypto-linked exchange traded products over that period. And billions worth of crypto derivatives contracts have been liquidated as futures traders try to ride out the storm. The volatility has been a test of how committed investors are to keeping BTC in their portfolios, the bank’s analysts wrote.

The total crypto market capitalization has fallen about 24%, or $1 trillion, since its October peak, according to the report.

The bank’s analysts said that while Bitcoin has often been touted as and compared to defensive hedges like gold and U.S. treasuries, it still hasn’t fully assumed that role with investors.

“Since October, Bitcoin has behaved more like a high-growth tech stock than an uncorrelated store of value. The average daily correlation between Bitcoin and the Nasdaq 100 index in 2025 YTD is 46%, and the correlation with the S&P 500 has risen to 42%,” the analysts wrote in a note shared with Decrypt. “Both correlations have sharply risen in recent weeks, reaching levels similar to those observed during the COVID-driven market stress of 2022.”

Gold and treasuries have steadily outperformed Bitcoin in recent months, the analysts added.

For a while, investors were certain that the Federal Open Markets Committee would lower interest rates again during its final meeting of the year in December. But remarks from Federal Reserve Chairman Jerome Powell and Fed Governor Lisa Cook have dashed those hopes.

“Further uncertainty around the Fed’s interest rate trajectory may continue to spur further declines in Bitcoin’s performance,” the bank’s analysts wrote. “This year to date, Bitcoin’s correlation of returns with Fed interest rates stands at -13%.”

There’s also been the matter of waning liquidity, the analysts wrote. “The dislocation from the October crash has set the tone for Bitcoin’s performance, creating a negative feedback loop between declining liquidity and falling prices,” the bank wrote.

It’s not just that the October crash affected liquidity that day, but rather that market makers got spooked and have been slow to rebound, Deutsche Bank wrote.

“According to data from Kaiko Research, order books across major crypto exchanges declined significantly that day, with ask-side liquidity effectively absent for several minutes,” they said. “This liquidity gap amplified the price impact and reduced market-maker willingness to provide liquidity.”

Editor’s note: This story was updated after publication to include additional context.