Cryptocurrency bear market reappears: One month erases annual gains, total market value plummets 20% from peak

The cryptocurrency market has erased nearly all of its annual market value gains in just over a month, a sharp reversal that has caught investors who were optimistic about the prospects of digital assets at the beginning of the year off guard.

Latest data shows that the total market value of cryptocurrencies has plummeted by 20% from the peak of $4.4 trillion reached on October 6, with the annual gain now only at 2.5%. This rapid decline began with the sudden liquidation of approximately $19 billion in leveraged positions, severely undermining market confidence.

Bitcoin has dropped 8% this week, on track for its worst weekly performance since March, and has fallen below the key support level of the 200-day moving average, which it had maintained since the bear market of 2022. Even more shocking is that the total market value of digital assets is now below the level at the time of Trump's inauguration, despite his previous strong push for the U.S. to become a global cryptocurrency hub.

Market participants warn that, in the absence of recent catalysts and ongoing concerns about safety and regulation, mainstream capital participation may continue to be weak. However, after six consecutive trading days of net outflows, U.S. spot Bitcoin and Ethereum ETFs recorded a net inflow of $253 million on Thursday, showing some signs of stability.

Leverage Liquidation Triggers Chain Reaction

This round of decline originated from large-scale leverage position liquidations in early October.

According to CoinGecko data, the total market value of cryptocurrencies began to plummet rapidly after reaching a historical peak of nearly $4.4 trillion on October 6. Approximately $19 billion in leveraged positions were suddenly liquidated within days of hitting an all-time high, becoming the catalyst for the collapse of market confidence.

This performance has shocked the market, as 2025 was originally defined as a year when regulators, global banks, and institutional investors would embrace digital assets more closely. Trump's policies to make the U.S. a global cryptocurrency hub had sparked a wave of activity, pushing Bitcoin up by as much as 35%.

However, the speed of the reversal in market sentiment is astonishing. The market value of digital assets has now fallen below the level at the time of Trump's inauguration, highlighting the extreme volatility of the cryptocurrency market.

Notably, while the recent sell-off in the cryptocurrency market has been widespread, the largest declines have been concentrated in altcoins—those smaller, more volatile tokens that have significantly underperformed this year.

SignalPlus partner Augustine Fan stated:

"Aside from Bitcoin and Ethereum, cryptocurrencies have basically been at a disadvantage for months. There has been little new capital flowing into altcoins or DeFi projects."

Fan added that, in the absence of recent catalysts and ongoing concerns about safety and regulation, mainstream participation may continue to be weak. This divergence indicates that even in a pressured overall market environment, investors still prefer to allocate funds to relatively mature mainstream digital assets.

AI Stock Valuation Concerns Spill Over to Crypto Market

Jeff Mei, the Chief Operating Officer of the cryptocurrency exchange BTSE, believes that the recent decline in digital assets is partly driven by "concerns about the severe overvaluation of AI stocks." He warned:

"If we see a sell-off in AI and tech stocks, Bitcoin is likely to fall below the $100,000 mark, and altcoins may drop even deeper."

This viewpoint highlights the increasingly close correlation between cryptocurrencies and traditional tech stocks. As institutional investors increase their allocation to digital assets, the cryptocurrency market is becoming more susceptible to broader market sentiment and changes in risk appetite.

Concerns about the overvaluation of AI-related stocks are spreading throughout the tech sector, thereby putting pressure on cryptocurrencies, which are viewed as risk assets. This cross-market transmission effect indicates that digital assets are no longer a completely independent investment category.

ETF Fund Flows Show Signs of Stability

Despite the overall lackluster market performance, some signs of stability have emerged. According to Bloomberg, after six consecutive trading days of net outflows, U.S. spot Bitcoin and Ethereum ETFs recorded a net inflow of $253 million on Thursday.

This shift in fund flows may indicate that some institutional investors are beginning to view the current price levels as a good opportunity to build positions. As an important channel for traditional investors to participate in the cryptocurrency market, ETF fund flows often reflect changes in institutional investor sentiment.

However, it remains to be seen whether the single-day inflow can be sustained. Market participants generally believe that, in the absence of clear positive catalysts, the cryptocurrency market may continue to face pressure