Bitcoin's Plunge: Have You Lost $10,000 Overnight? Discover the Shocking Truth Behind the Crypto Chaos!

By Hannah Lang and Elizabeth Howcroft

Bitcoin is experiencing a significant downturn, having wiped out all of its price gains since the election of U.S. President Donald Trump. Industry experts suggest that this decline may continue as liquidity in the market is expected to remain thin for the foreseeable future. Bitcoin's price has recently fallen below $61,000, marking its lowest level since the month before Trump's election.

The slump in Bitcoin's value aligns with broader investor concerns surrounding inflated technology valuations and the uncertain trajectory of U.S. Federal Reserve rate cuts. Thomas Probst, a research analyst at crypto data provider Kaiko, observes that "this contraction has been underway for several months and remains ongoing, suggesting it is likely to persist for some time." He further explains that reduced liquidity translates into "sharper and more erratic price movements."

The situation worsened after January 30 when Trump announced Kevin Warsh as the next Fed chair. This appointment raised expectations that Warsh would take measures to shrink the Fed's balance sheet, which could lead to diminished demand for Bitcoin. Following this announcement, precious metals and cryptocurrencies suffered a massive sell-off, resulting in Bitcoin's price declining by 20% before slightly rebounding. This volatility has prompted questions about the future of Bitcoin and other cryptocurrencies throughout 2025. Last October, the market faced its largest liquidation event in history after Trump introduced new tariffs on Chinese imports, a situation that significantly impacted market liquidity.

Denny Galindo, an investment strategist at Morgan Stanley Wealth Management, commented that "the flash crash back in the fall was this kind of pin that popped the leverage bubble," referring to the rapid decline in Bitcoin's value. The Trump administration's initially favorable stance toward cryptocurrencies significantly boosted Bitcoin's price throughout 2024, driving it to an all-time high of over $125,000 in October. Nevertheless, even the recent pro-crypto policies implemented by Trump have not prevented the latest price declines.

Despite the current downturn, some analysts believe that the worst may already be over. James Butterfill, head of research at crypto asset manager CoinShares, points out that "there are several things signifying that we are very close to a bottom, if not having achieved it." He notes that selling by "whales"—individuals or entities holding 10,000 or more Bitcoin—has started to slow, which could indicate a stabilization in the market. "I think a lot of investors are seeing this as actually an opportunity, rather than running for the hills," he added.

Liquidity in the market remains a critical concern. Bitcoin's average 1% market depth, a measure of its ability to absorb trades without significant price fluctuations, has plummeted from over $8 million in 2025 to around $5 million currently, according to Probst. This reduction means that even minor trades can cause considerable price movements, exacerbating the market's volatility. "It is the trend in liquidity that is truly concerning," Probst stated, highlighting the potential for further erratic price changes in the coming weeks.

Andrew Moss, head of digital assets research at Jefferies, is cautious about the market outlook, stating, "We see few bullish indicators that suggest we may be approaching the bottom." While cryptocurrencies represent a relatively small segment of global markets, their connections to mainstream finance—through stablecoin reserves, crypto-related stocks, and bank exposure—have grown more pronounced in recent years.

The correlation between Bitcoin and equities has also intensified, making the cryptocurrency more sensitive to macroeconomic and geopolitical developments. On a positive note, global equity indexes saw a rise on Friday as investors returned to U.S. technology stocks after a significant sell-off. Bitcoin's value rose more than 10%, surpassing the critical $70,000 mark during this rebound.

The initial surge in Bitcoin's value following Trump's election in November 2024 was fueled by investor optimism regarding potential regulatory overhauls and the establishment of a strategic Bitcoin reserve. Trump has also been involved in various crypto ventures, including a meme coin named after him and a family-led venture called World Liberty Financial. His administration swiftly addressed key requests from the crypto industry, such as reforming the U.S. Securities and Exchange Commission and enacting regulations for dollar-pegged crypto tokens. However, the full extent of future crypto-friendly measures remains uncertain.

While Trump signed an executive order to create a national Bitcoin stockpile from seized assets, the government has not yet engaged in a buying spree of Bitcoin, a move some investors were hoping for. "It was created, but maybe it wasn't this kind of big moment... some of those people before the inauguration were kind of hoping for," remarked Galindo.

As the market continues to grapple with these challenges, investors must navigate a landscape marked by uncertainty and volatility. The interplay of macroeconomic factors, regulatory changes, and market sentiment will ultimately shape Bitcoin's trajectory in the months to come.