Bitcoin’s “free fall”: a crisis of trust and market reconstruction caused by multiple factors

Nakamoto 2025-11-17 17:08 48176人围观 BTC

On November 17, 2025, the cryptocurrency market ushered in a historic gloomy moment. The price of Bitcoin plummeted to $93,778.6 during the session, officially declaring that all its gains during the year were in vain. This figure is in stark contrast to the record high of $126,251 set just over a month ago on October 6. This tragic decline of more than 25% was not a simple technical correction, but a "perfect storm" caused by multiple factors such as institutional divestment, whale selling, macro policy shifts, and a vicious cycle of market sentiment. It profoundly reveals the fragility and structural contradictions exposed by Bitcoin in its attempt to integrate into the mainstream financial system.

1. The collapse of pillars: collective “defection” of institutional funds”

The narrative core of this Bitcoin bull market is fundamentally different from the 2020-2021 cycle, and its greatest support comes from the entry of traditional financial institutions. The approval and successful operation of the Bitcoin spot ETF is regarded as a sign that cryptocurrency has been "recruited" by the mainstream financial system. As of early October 2025, Bitcoin ETFs have attracted a huge inflow of more than US$25 billion, with assets under management (AUM) reaching approximately US$169 billion, providing the market with unprecedented liquidity and legality endorsement.

However, success is also Xiao He, failure is also Xiao He. The characteristics of institutional funds determine its instinct to "give umbrellas when it is sunny and close them when it rains". Unlike cryptocurrency fundamentalists who firmly believe in the "four-year halving cycle", traditional institutional investors (such as ETF allocators, corporate financial departments) lack religious belief in Bitcoin, and their decisions are strictly based on risk-return ratio, asset allocation efficiency and macro liquidity environment.

In the past month, when the market showed signs of volatility, these "core buyers" quickly showed their ruthless side and collectively turned to divestment. The share price of MicroStrategy, the world's largest public holder of Bitcoin, fell by more than 32% during the month. This not only severely damaged the value of its own positions, but also sent an extremely dangerous signal to the market: Even the most determined "Bitcoin flag bearer" has encountered a crisis of trust. How can the cornerstone of confidence of other institutions be stable? The withdrawal of institutional funds is like removing the core load-bearing wall that supports the Bitcoin price building. The chain reaction caused by its collapse can be imagined.

2. Internal disintegration: profit-taking by long-term holders and whales

Under the external pressure of the withdrawal of institutional funds, the structural selling pressure within the market has also reached a critical point. For early investors and long-term holders, the psychological barrier of $100,000 is an extremely tempting profit-taking line. Since Bitcoin broke through the $100,000 mark for the first time in December 2024, a quiet but continuous "victory escape" has begun.

Data shows that in the past 30 days, long-term Bitcoin holders (usually refers to addresses that have held Bitcoin for more than 155 days) have sold approximately 815,000 Bitcoins, setting the highest selling scale since early 2024. What is particularly alarming is that those "prehistoric whale" wallets that have held Bitcoin for more than seven years have begun to sell continuously at a rate of more than 1,000 coins per hour. This kind of "long-flowing" distribution has a more hidden and lasting destructive effect on the market than a centralized "stomping" escape. It is not like a sudden avalanche, but more like the continuous melting of glaciers, constantly eroding the market's ability to undertake, so that buying orders are exhausted unconsciously. When the price fell below the key psychological defense line of $100,000 in November, the selling wave spread like water from a dam and became the "last straw" that crushed the market.

3. Dramatic changes in the environment: Tightening of macro liquidity and linkage with risky assets

Bitcoin’s current decline is by no means an isolated incident and must be viewed within the broader global macroeconomic picture. The core logic that previously underpinned the rise in risk assets - expectations of interest rate cuts by the Federal Reserve and ample liquidity - is being reversed.

According to market pricing, the probability of the Federal Reserve cutting interest rates in December has plummeted to 44.4% from as high as 70% previously. This drastic change means that the loose monetary environment that the market had expected may not come so soon, and there may even be a risk of continuing to maintain high interest rates for a longer period of time. The expected tightening of macro liquidity has directly led to the reduction of "cheap money" worldwide, and investors have begun to withdraw from high-risk and highly volatile assets in search of safer harbors.

At the same time, another important linkage effect emerged. Silicon Valley technology giants' huge investment in artificial intelligence (AI) projects has begun to cause market concerns. Investors have questioned whether their huge capital expenditures can bring corresponding returns, leading to a collective correction in technology stocks. A fact that cannot be ignored is that a large amount of funds invested in technology stocks have also invested in Bitcoin, viewing both as high-risk growth assets representing future innovation. Therefore, the correction of technology stocks has a strong resonance effect with the decline of Bitcoin. In this context, in order to make up for the margin gap or simply to avoid risks, investors will give priority to selling highly liquid but highly volatile assets such as Bitcoin, and instead pour into traditional safe-haven assets such as gold. The spot gold price followed the trend and exceeded US$4,100 per ounce, which was in sharp contrast to the miserable situation of Bitcoin and clearly demonstrated the sharp shift in market risk appetite.

4. Emotional collapse: failed policy expectations and self-fulfillment of panic

The market not only trades reality, but also trades expectations. Previously, the market had optimistic expectations for possible pro-cryptocurrency policies after the U.S. election. This sentiment once provided an additional "sentiment premium" for Bitcoin prices. However, as time went by, specific and substantive favorable policies did not come as expected. This expectation gradually faded, and market sentiment turned from optimism to disappointment.

In early October, former President Trump’s remarks about imposing additional tariffs triggered fluctuations in global risk assets, and Bitcoin also opened a downward channel. The flash crash of more than 13% in a single day on October 11 was undoubtedly a fatal blow to sentiment. The tragedy of that day, when 1.6 million people liquidated their positions and US$19.1 billion in funds was wiped out, left a huge psychological trauma in the market. The shadow of panic has not yet dissipated. Since November, nearly 100,000 and 160,000 people have been liquidated in a single day, which has continued to stimulate the sensitive nerves of investors.

In this extreme environment, market sentiment quickly slipped from "Fear" to "Panic". Negative discussions on social media increased sharply, the panic index soared, and retail investors began to irrationally follow suit and sell, forming a death spiral of "fall → liquidation → forced liquidation to aggravate the decline → triggering more panic selling." Once this vicious cycle is formed, its own destructive power often exceeds the fundamental factors that initially triggered the decline.

Conclusion: The nature of exposure and future challenges

To sum up, Bitcoin’s erasure of all gains over the past year is a typical release of systemic risks caused by both internal and external factors. It clearly shows that although Bitcoin strives to be a mainstream financial asset, its price formation mechanism is still extremely fragile and lacks the intrinsic value support of the real economy or stable cash flow. It is more like a mirror that highly sensitively reflects subtle changes in global liquidity, risk appetite and market sentiment.

In the short term, if the Federal Reserve's monetary policy fails to turn loose and institutional funds fail to flow back, the Bitcoin market is likely to continue to remain weak and even face further tests. This rollercoaster-like market is a profound warning to all market participants, from institutions to retail investors: While enjoying the excess returns that high volatility may bring, one must be soberly aware of the huge risks and essential attributes hidden behind it. The road to maturity for the cryptocurrency market is still long and tortuous.