After record highs, why crypto crashed and wiped out $1.2 trillion in weeks

A rapid reversal in sentiment, macroeconomic uncertainty, heavy liquidations and sharp ETF outflows have erased $1.2 tn from crypto markets, pulling Bitcoin off record highs and unsettling investors

After a long winter that the cryptocurrency market endured and only recently seemed to be coming out fighting, it seems poised for another dramatic turn of events. Trillions of dollars in value are being wiped out in cryptos in a matter of only weeks, reversing much of the hard-won gains that had revived investor sentiment earlier this year. Bitcoin, which lit all eyes up in its recent run-up to a record-breaking $126,000 and had reignited hopes of a sustained bull run, has retreated back towards $90,000, dragging the wider market down with it and triggering one of the steepest sell-offs the digital-asset world has seen in years.

What happened to crypto market sentiment?

 

Over the past six weeks, the global cryptocurrency market has plunged roughly a quarter of its value, wiping out about $1.2 trillion from the top-line market capitalisation of all digital assets. The total market capitalisation of cryptocurrencies came down from about $4.4 trillion in early October to just over $3.15 trillion by mid-November. Bitcoin fell from a peak above $126,000 in early October to trade almost at $90,000 in mid-November, a decline of roughly 25–30 per cent from that peak. The slump erased almost all of crypto’s gains for 2025 and pushed many other tokens far deeper into losses.

 

And it is not just Bitcoin that is bearing the brunt of the wipeout. Ethereum (ETH) has also taken a huge hit, with reports from November showing it plunging as much as 12 per cent in a single session to around $3,166 and trading around $3,000 on Wednesday. Over the past month, Ether has lost nearly 21 per cent of its value.

 

Meanwhile, Solana (SOL) has also been among the worst affected. The cryptocurrency was trading down 26 per cent at $139 from a high of $200 just a couple of weeks ago, increasing the pain for leveraged long positions and rattling confidence in riskier sectors of the crypto market.

 

And behind the start of the fall of the crypto dominoes lies October 10, when a sudden announcement by US President Donald Trump of 100 per cent tariffs on Chinese imports triggered what many market experts are now calling the defining moment of the crypto meltdown. Within hours of his announcement, more than $19 billion in leveraged crypto positions were liquidated.

 

Subsequently, investors started pulling large sums from spot Bitcoin exchange-traded funds (ETFs), with one reported single-day outflow of about $870 million in mid-November, according to a Reuters report.

Why did the crypto market crash so sharply?

 

Market participants widely pointed to fading expectations that the US Federal Reserve would cut interest rates soon. Experts cited by Reuters stated that usually when rate-cut bets begin to evaporate, investors tend to move away from high-volatility assets such as cryptocurrencies and move towards safer instruments. That broader risk aversion coincided with weakness in high-growth tech stocks, amplifying outflows from speculative corners of the market.

 

A CNN report said that much of the price action was driven by leveraged positions in futures and margin trading. When prices move sharply, leveraged positions are automatically closed, adding selling pressure and generating feedback loops. Consequently, billions of dollars' worth of cryptos were forced into liquidations across multiple exchanges within a short time span.

 

The sell-off has also coincided with losses in certain equity sectors, specifically speculative tech (AI), which helped push investors toward safer assets. While so far traditional finance firms have not reported systemic strain tied directly to crypto, the episode shows how sentiment shifts in one market can echo more broadly in others.

 

Meanwhile, the arrival of large institutional products—notably spot Bitcoin ETFs—changed the market’s plumbing, Bloomberg said. While inflows had helped fuel the rally earlier in the year, large, concentrated redemptions from these vehicles during the sell-off required ETF providers to sell or rebalance holdings, adding supply to already stressed markets.

 

Ashish Singhal, co-founder of crypto-trading platform CoinSwitch, said, “Bitcoin fell below $90,000 for the first time in seven months, influenced by factors such as uncertainty around potential US interest rate cuts, broader negative equity market sentiment, and large holders reducing their positions. While some point to a death cross, similar patterns in the past have also preceded recoveries.”

 

“Overall, the movement reflects a period of short-term volatility across markets. For some participants, the pullback may also be viewed as an opportunity to accumulate at lower levels,” he added.  ALSO READ | Bitcoin sinks below $90k as macro jitters mount; bottom or further pain?

Who lost the most in the crypto crash, and what should investors watch next?

 

Like always in a falling market, it is retail investors who stand to lose the most. This time too, retail and leveraged traders suffered immediate losses through forced liquidations. Meanwhile, institutional holders, including corporate treasuries and ETF investors, also saw sizeable markdowns in portfolio value as Bitcoin and large altcoins fell, according to Reuters.

 

The ETF redemptions and other product outflows removed a key source of buying that had been supporting prices earlier in the year, and continued net outflows could keep selling pressure elevated and delay any sustainable recovery, Bloomberg cautioned.

 

Episodes of sharp fluctuation like this one usually invite renewed regulatory scrutiny and calls for improved market safeguards such as liquidity measures, better disclosure, and stronger custody practices, the Financial Times said, citing crypto market analysts. Several jurisdictions have already signalled closer attention to derivatives, retail leverage and exchange resilience after recent volatility.

 

As one market assessment by CoinSwitch put it, “BTC, after a period of consolidation, dropped below $100K but has since seen a partial recovery and stabilised in the $94K–$95K range. The pullback was driven by long-term holders taking profits, slower ETF inflows, and temporary macro uncertainty. With the US shutdown delaying key economic data and uncertainty around rate cuts, investors remain cautious… Until a clear macro catalyst or fresh institutional flows emerge, Bitcoin may continue moving sideways. Traders should manage risk and wait for confirmed signals before taking new positions.”