The value of bitcoin has plunged in recent days as bitcoin “whales” sell, and as concerns about a cyclical bear market grow.
Bitcoin fell below $90,000 on Tuesday for the first time since April. That marks a precipitous decline from a recent peak of over $124,000, a significant 27% decrease. Also, bitcoin has now shed all of this year’s gains and is now down about 1% from the start of the year, a major course correction.
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While there have been clearer causes of rallies and dips in the past, this time around, there isn’t just one identifiable trigger. Rather, experts say that the recent declines are a result of a confluence of factors.
Zack Shapiro, head of policy at the Bitcoin Policy Institute, said that one of the reasons for the decline is a rotation out of the market by some of the earliest holders of the flagship cryptocurrency.
“So this is sort of whales, people that have a lot of bitcoin from the early days, are selling in large numbers,” Shapiro told the Washington Examiner.
Bitcoin has received more institutional support over the past year after President Donald Trump ran in part on being the first president to champion the nascent industry. He received strong support from the crypto world, and since assuming office, has filled key positions with crypto advocates.
Pension funds, endowments, large investors, and family offices, particularly through ETFs, have moved to purchase some of the bitcoin being offloaded by the whales, Shapiro said. However, there is still significant pressure to sell in the market right now.
One reason why these early investors might be selling now is that this is the first time they have a lot of liquidity, Shapiro said.
“So if you have hundreds of millions or billions of dollars’ worth of bitcoin, this is the first time you can probably take, real generational wealth off the table without moving the price, at least up to this point,” he said. “So I think people have taken the opportunity to do that, structure their inheritance, change their lifestyle, that type of thing.”
Nicholas Slettengren, CEO of crypto tax services company Count On Sheep, stated that some institutional investors, such as BlackRock, have also recently sold some bitcoin. He mentioned that big firms like that might also want to pull some from the market.
“And that’s basically, hey, we had a screaming year in the market, and why not take some off the table for our clients and for our shareholders?” Slettengren told the Washington Examiner.
He said that some smaller investors might then see those transactions and panic-sell, adding to the overall market reaction.
Additionally, many investors believe in a four-year price cycle for bitcoin, driven by a process known as the “halving.”
To “mine” for bitcoin, high-powered computers are used to verify virtual coin transactions. Bitcoin operates on what is known as a blockchain, essentially a public ledger, that contains the history of every transaction. The miners’ computers solve complex mathematical problems to add new blocks to the chain, and in turn, are rewarded with the digital token, making the endeavor profitable.
However, about every four years, the block rewards for bitcoin miners are slashed in half, reducing the supply of new bitcoins by 50%. That makes the product a scarcer commodity and tends to raise its price in the following months.
The first year after the halving is historically a bull market, but the market can then start to pull back or decline. For context, the last halving took place in April 2024.
Because it has been over a year and a half since the last cycle began, Shapiro said investors have concerns about entering a cyclical bear market.
Still, it is worth noting that, despite recent declines, bitcoin remains significantly higher than it was just a few years ago. For instance, bitcoin was worth less than $19,000 just five years ago, marking a strong 400% growth for investors, far outperforming the stock market.
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And there is some hope for next year, even despite the dynamics of the four-year cycle.
Slettengren pointed out that Federal Reserve Chairman Jerome Powell is departing the central bank next year. Trump has been pushing for lower interest rates and looser monetary policy, so presumably, whoever he replaces Powell with will share that same philosophy, which could be a boon for markets.
