Reversals of fortune are nothing new for Bitcoin diehards — euphoric rallies, then brutal selloffs. They happen every few years, or whenever sentiment snaps.

None of those previous episodes, though, have prepared traders for the speed and scale of the past few weeks, in a reversal that was sharper than expected even if it lacked the systemic stress of prior crashes.

Friday’s drop sent Bitcoin to a low near $80,500, putting it on track for its worst month since Terra’s $60 billion collapse in 2022 set off the bankruptcies that ended in FTX. Altogether, some half a trillion dollars in Bitcoin value has been wiped out. And that’s before tallying the carnage across the altcoin complex.

Bitcoin is still comfortably up since President Donald Trump’s November victory, but much of the heady run has vanished in his first year back in office, the very stretch he hailed as crypto’s golden age. Most of the losses remain on paper. But for the first time since exchange-traded funds helped bring Wall Street and retail into the market, those positions are under pressure.

The spark this time around is harder to spot. These new ETFs didn’t exist during the last big crypto crash. Investors have pulled billions from the 12 Bitcoin-linked funds this month, Bloomberg data show, with past buyers including Harvard’s endowment and several hedge funds.

The slew of digital-asset treasury companies — publicly traded crypto holding vehicles, inspired by Michael Saylor’s Strategy Inc. — have seen even steeper outflows as investors question the value of corporate shells built solely to hold tokens.

What’s clear is that crypto has become much bigger than the retail traders and techno futurists who are committed to HODLing through thick and thin. Now it has become woven into the fabric of Wall Street and the broader public markets, bringing a whole new set of finicky players to the table.

“What’s happened these last two months was like rocket fuel, as if people were expecting this to crash,” said Fadi Aboualfa, head of research at Copper Technologies Ltd. “That’s what institutional investors do. They’re not there to hold, they don’t have that mentality. They rebalance their portfolio.”

Bitcoin remains up roughly 50% from its pre-election low. And the scale of this pullback still pales next to its 75% collapse during the 2021–2022 bear market. That hints at how much deeper the pain could still go. Back then, each leg down exposed another major player — from Celsius to BlockFi to Three Arrows.

Flash Crash

But with no obvious blowups or scandals this time, some traders think the current drop is more about technicals and confidence than systemic cracks.

“We aren’t following the same path down; overall macro conditions, government support, and fewer bad actors in the space make today’s market more resilient,” said Luke Youngblood, founder of lending platform Moonwell. “The foundations crypto is building on are stronger, even if there are causes for concern down the line.”

The clearest catalyst was a flash crash on Oct. 10 in which $19 billion of crypto bets were liquidated in a matter of hours. The event exposed the chronic lack of liquidity during weekend trading — the flipside to crypto’s famed 24-7 trading schedule — as well as a build-up of excessive leverage on certain exchanges, knocking Bitcoin from the all-time high of $126,251 that it had reached just days earlier.

“To some extent, we believe a lot of the decline in crypto markets is due to what happened on 10/10,” Brett Knoblauch and Gareth Gacetta, analysts at Cantor Fitzgerald & Co., wrote in a Thursday note. “It feels as if some big players in the space are being forced to sell, as what happened on 10/10 might have had a far-larger impact on balance sheets than initially thought.”

The problem hasn’t quite died out yet either. Liquidity in crypto markets remains low, with market makers weakened by the crash unable to step in and support prices. Around $1.6 billion in bets were liquidated across exchanges on Friday, according to Coinglass data, as the latest drop hit leveraged traders.

Bitcoin’s gold-like mystique — always a big stretch — has faded. Gold has held its ground. Crypto remains a proxy for fast-twitch risk appetite — and it’s reacting faster than the market around it.

This week, Bitcoin got caught up in topsy-turvy trading in technology stocks, with the token’s volatility being pointed to as both the cause and effect of equities turmoil. On Thursday, for example, the S&P 500 rose early in the day, bolstered by strong earnings from Nvidia Corp., before suffering its biggest intraday reversal since the April tariff turmoil.

Analysts at Nomura blamed crypto, among other causes. Bill Ackman floated an unusual link — suggesting Fannie and Freddie holdings were behaving like a crypto proxy.

Crypto’s fate is now tied to AI-fueled market optimism. With bubble chatter building, it won’t take much to spook investors into selling. There are also plenty of dangers lurking within the crypto ecosystem. The Saylor copycats have been built on the belief that a public company that does nothing but hold crypto can be worth more than the value of the tokens it holds.

The push to repurpose public firms into crypto treasuries has endured to this point in the downturn — echoing the overleveraged lenders of 2022. If confidence cracks, forced selling could follow. Many are already underwater on their token holdings.

“When you’ve got a medical device company or a cancer research firm rebranding as a crypto treasury, it’s a sign of where you are in the cycle,” said Adam Morgan McCarthy, senior research analyst at blockchain data firm Kaiko.

Overall, any positive vibes left in the industry appear to be hurtling toward rock bottom. The Fear and Greed index — a tool that measures sentiment in crypto markets — sat at a score of 11 out of 100 on Friday, according to CoinMarketCap. That’s deep in “extreme fear” territory.

“Fear sentiment has spiked to relative highs while structural demand for spot remains notably absent, leaving the market without the natural buyers typically present during significant corrections,” said Chris Newhouse, director of research at Ergonia, a firm specializing in decentralized finance.