Bitcoin Plummets Below $85,000 Amid Broader Market Sell-Off

Bitcoin, the leading cryptocurrency, experienced a significant decline on Monday, falling below the crucial threshold of $85,000 as part of a broader market downturn. The cryptocurrency dropped 6.5% after an earlier plunge of nearly 12%, marking a stark contrast to its record high of $126,210.50 achieved on October 6, 2024. This downward trend reflects a wider sell-off in technology stocks, which many investors believe are overvalued.

The decline in Bitcoin has been mirrored by a substantial drop in companies associated with cryptocurrencies. Major players in the market felt the impact of the sell-off, with Coinbase Global seeing a 5.4% decrease and Robinhood Markets declining by 4.4%. Additionally, Riot Platforms, a Bitcoin mining company, lost 2.8%. The situation was exacerbated for Strategy, a firm focused on acquiring Bitcoin, which saw its stock tumble by 10%. This company currently holds 649,870 Bitcoin, valued at approximately $55 billion as of 1 PM ET on Monday.

The cryptocurrency market has not been kind to investments linked to former President Donald Trump. The American Bitcoin venture, which includes stakes from both Eric Trump and Donald Trump Jr., fell by 8.1% and is down over 41% since September 30, 2024. Other related ventures have also seen significant losses, including the World Liberty Financial token, which dropped in market value from above $6 billion in mid-September to approximately $4.14 billion.

Investors have increasingly turned to exchange-traded funds (ETFs) that allow exposure to Bitcoin without direct ownership. Data from Morningstar Direct indicates that November saw a remarkable outflow of $3.6 billion from spot Bitcoin ETFs, marking the largest monthly withdrawal since these funds began trading in January 2024. Meanwhile, Bitcoin futures have decreased nearly 24% in the past month, contrasting sharply with gold futures, which have risen by almost 7%.

Several factors contribute to the current sell-off in Bitcoin and other cryptocurrencies. Analysts highlight a prevailing risk-off sentiment in the market this fall, which has encouraged investors to seek safer assets like bonds and gold. In a recent research note, analysts from Deutsche Bank suggested that institutional selling, profit-taking by long-term holders, and a more hawkish stance from the Federal Reserve have also played significant roles in the decline. They noted that stalled regulatory developments in the crypto space have added to investor uncertainty.

“While volatility remains inherent, these conditions indicate Bitcoin’s portfolio integration is being tested, raising questions of whether this is a temporary correction or a more prolonged adjustment,” the analysts commented.

On the regulatory front, the cryptocurrency industry received a boost in July 2024 when Donald Trump signed legislation introducing initial regulations and consumer protections for stablecoins. These coins are pegged to assets like the U.S. dollar to mitigate price volatility. However, a proposed bill aiming to establish a new market structure for cryptocurrencies remains stalled in the Senate, continuing to be a priority for the industry, which has invested heavily in political support.

As Bitcoin struggles to regain its footing, investors will be keenly observing both market movements and regulatory developments that could influence the future trajectory of cryptocurrencies.