Behind the Bitcoin crash: Federal Reserve's hawkish stance + regulatory wrangling + institutional flight + holders fleeing, is there still a way out under these five deadly blows?

Bitcoin has fallen from a peak of about $125,000 in early October to around $80,000 in this round of sharp decline, a drop of nearly 35%. In the past month, the total market capitalization of the entire cryptocurrency market has evaporated by an astonishing $1 trillion, a decline of 24%.

On November 28, according to news from Chasing Wind Trading Desk, Deutsche Bank stated in its latest research report that this decline reflects a combination of macro and micro-level pressures: a broad decline in risk assets, a hawkish shift by the Federal Reserve, stagnation in regulatory progress, outflows of institutional funds, and profit-taking by long-term holders.

Bitcoin has currently rebounded to above $90,000, equivalent to its price in May 2025. However, its volatility has surged from a low of 20% in August to 39%, and its correlation with the Nasdaq and S&P 500 indices has risen to 46% and 42%, respectively, once again exhibiting characteristics of a high-risk asset rather than a safe-haven tool. Deutsche Bank analysts pointed out that this "Tinkerbell effect" indicates that Bitcoin's valuation still largely depends on belief-driven adoption.

Whether Bitcoin can stabilize and rebound remains highly uncertain. Deutsche Bank stated that unlike previous declines, this one occurred against a complex backdrop of deep institutional participation, close linkage to the macro economy, and key policies hanging in the balance, with recovery relying on regulatory clarity, stablecoin adoption, and central bank support, leaving the outlook full of uncertainty.

Market Sentiment Reversal — Safe-Haven Aura Fades, Living and Dying with Tech Stocks

The narrative of Bitcoin as a safe-haven asset has been thoroughly debunked in this round of decline.

The report pointed out that the sell-off of Bitcoin occurred simultaneously with the decline of the U.S. stock market and other risk assets. Amid rising trade tensions, a government shutdown, and concerns over valuations in the artificial intelligence sector, Bitcoin did not show an independent trend but instead plummeted alongside high-growth tech stocks.

Data shows that this correlation is rapidly increasing. From 2025 to date, the average daily correlation between Bitcoin and the Nasdaq 100 index has reached as high as 46%, while its correlation with the S&P 500 index has also climbed to 42%.

In contrast, traditional safe-haven assets such as gold and U.S. Treasury bonds have significantly outperformed Bitcoin in recent months. For example, on October 10, due to the Trump administration's threat to impose a 100% tariff on Chinese goods, Bitcoin plummeted 5.6% that day, while gold prices rose by 1.03%.

Deutsche Bank stated in its research report that this clearly indicates that in times of heightened macro uncertainty, the market tends to sell Bitcoin rather than buy it as a safe haven.

Federal Reserve's Hawkish "Curse" — Rate Hike Expectations Weigh Heavy, Liquidity Feast Comes to an End

The Federal Reserve's monetary policy is the sword of Damocles hanging over Bitcoin's head The report emphasizes that there is a strong negative correlation between Bitcoin prices and Federal Reserve interest rates. Historical data shows that the correlation between Bitcoin prices and rates reached an astonishing -90% during the Federal Reserve's rate hike cycle in 2022.

Despite the Federal Reserve lowering rates by 25 basis points at the FOMC meeting in October, Chairman Jerome Powell's hawkish remarks—"A rate cut in December is far from a foregone conclusion"—directly triggered market panic.

Following Powell's comments, Bitcoin prices fell by 1.22% on October 29. Subsequently, on November 4, Federal Reserve Governor Lisa Cook reiterated that a rate cut in December is not a certainty, leading to a more than 6% drop in Bitcoin prices that day.

Deutsche Bank stated that the correlation between Bitcoin returns and Federal Reserve interest rates has been -13% so far in 2025. As long as expectations for future monetary policy easing are suppressed, Bitcoin will continue to face pressure.

Regulatory Vacuum Reemerges—Legislative Process Stalled, Market Confidence Undermined

The long-awaited regulatory measures have yet to materialize, stifling market confidence.

The report points out that the "Digital Asset Market Clarity Act" (CLARITY Act), passed by the U.S. House of Representatives in July, was seen as a significant positive development, driving a wave of rebound in the crypto market. However, this bill, aimed at clarifying the regulatory framework, is now stalled in the Senate Banking Committee.

Republican Senator Tim Scott noted that due to the government shutdown and bipartisan disagreements on decentralized finance (DeFi) identity verification and anti-money laundering (AML) controls, the bill is not expected to be signed before 2026.

Deutsche Bank believes that the loss of regulatory momentum directly hinders the entry of institutional investors and the deepening of market liquidity.

Data from the report shows that Bitcoin's volatility has rebounded from a low of 20% in August to 39%. Meanwhile, the cryptocurrency usage rate among U.S. retail investors has also dropped from 17% in July to 15% in October, indicating a cooling of market participation.

Institutional Exodus and Liquidity Drain—ETF Funds Reversal, Market Depth Plummets

Institutional funds that once drove the Bitcoin bull market are now fleeing in the opposite direction. The report reveals a dangerous negative feedback loop: price declines lead to liquidity drain, and liquidity drain amplifies price declines.

According to data from Kaiko Research, during the sell-off on October 10, the order book depth of major cryptocurrency exchanges sharply declined, with seller liquidity even disappearing at one point.

This lack of liquidity has not fundamentally improved since the October crash. Worse still, the billions of dollars that previously flowed into the market through spot Bitcoin ETFs are now reversing.

Data shows that U.S. spot Bitcoin ETFs have recently experienced large-scale daily net outflows, contrasting sharply with the massive inflows earlier this year. Deutsche Bank stated that the withdrawal of institutional funds, combined with already fragile liquidity, has left Bitcoin vulnerable in the face of macro headwinds.

"Old Investors" Are Also Running Away—Rare Selling by Long-Term Holders, Market Sentiment Plummets

Unlike previous crashes driven by new entrants or highly leveraged traders, this round of decline has seen even the most steadfast long-term holders join the selling ranks.

Blockchain data shows that in the past month, long-term holders have sold over 800,000 Bitcoins, the highest level since January 2024.

These investors, typically seen as the market's "ballast," have begun to take profits or cut losses, significantly increasing the market's circulating supply and severely undermining market confidence.

The "Crypto Fear and Greed Index," which measures market sentiment, fell to 11 on November 21, marking the lowest level this year and indicating that the market has entered a state of extreme fear.

The bank noted that when even the "old investors" start to flee, the short-term bearish momentum in the market is further reinforced.

Where Is the Way Out?

After enduring these five major blows, whether Bitcoin can stabilize and rebound remains highly uncertain.

Deutsche Bank believes that unlike previous downturns, this decline occurs against a complex backdrop of deep institutional involvement, close ties to the macro economy, and unresolved key policies.

The bank pointed out that looking ahead, Bitcoin's "way out" is not smooth. Its recovery will depend on several key factors:

• First, the final clarification of regulations, particularly the progress of the CLARITY Act, which will be crucial for restoring institutional confidence.
• Second, the adoption of stablecoins by mainstream institutions may help improve overall market liquidity.
• Finally, the growing interest of governments and central banks in crypto assets, including those from Luxembourg and the Czech Republic, may provide new long-term support for the market