Understanding Bitcoin's Recent Fall Below $90,000: Market Factors and Future Outlook

Bitcoin has experienced a substantial decline, losing approximately 25% of its value since reaching its record high in early October. The cryptocurrency briefly dipped below $90,000 on Tuesday, a significant drop from the $126,000 peak it achieved at the beginning of October.

Let's examine why investors are currently retreating from this volatile digital asset.

What factors contributed to this recent price decline? Before the current slump, Bitcoin had been breaking consecutive record highs following Donald Trump's presidential election victory. The US president has been a vocal advocate for cryptocurrencies both during his campaign and after winning the election.

Bitcoin initially surpassed the $100,000 threshold in May before climbing to approximately $126,251 last month, its most recent all-time high.

This upward momentum was further bolstered by expectations of interest rate reductions from the Federal Reserve after disappointing US employment data, which negatively impacted the dollar's strength.

However, investor sentiment shifted when Trump rekindled concerns about a potential trade conflict with China last month, prompting many to seek refuge in safer assets rather than volatile cryptocurrencies.

Those who had speculated on Bitcoin's continued ascent suffered substantial losses. According to Rachael Lucas, a cryptocurrency analyst at BTC Market, approximately $20 billion worth of Bitcoin trades were liquidated.

Why is Bitcoin's value continuing to fall? Between its early October record and Tuesday's drop below $90,000, Bitcoin shed a quarter of its value.

Other digital currencies also declined on Tuesday, including Dogecoin, the speculative cryptocurrency promoted by Elon Musk.

All assets considered higher risk, including stocks, are experiencing downward pressure in financial markets after the prolonged US government shutdown prevented the release of important economic indicators.

These economic figures are considered crucial for understanding the extent to which the Federal Reserve might implement additional interest rate cuts in upcoming months to stimulate economic growth.

Simultaneously, several Fed officials have suggested that a rate reduction might not occur during the US central bank's December monetary policy meeting.

This has strengthened the dollar while negatively affecting stock markets and Bitcoin.

"If market expectations for a December rate cut return due to favorable economic data, we could quickly see Bitcoin and other cryptocurrency prices reverse course and rally significantly," explained Simon Peters of brokerage firm eToro.

What does the future hold for Bitcoin? John Plassard, investment strategy director at private bank Cite Gestion, suggests that the current "disenchantment reflects a deeper reality" - that individuals have become "wary" following previous price collapses, particularly regarding cryptocurrencies viewed as even more speculative than Bitcoin.

According to Thomas Probst from crypto data analytics firm Kaiko, the sector's volatility remains "an obstacle" to cryptocurrencies' "widespread adoption at both individual and institutional levels".

Nevertheless, cryptocurrencies have benefited from growing institutional interest and increased regulatory clarity - not exclusively in the United States.

The European Union has established its own framework with the MiCA regulation implemented at the end of last year.

London is anticipated to propose its own regulatory structure sometime in 2026.

Created in the aftermath of the 2008 global financial crisis, Bitcoin initially championed libertarian ideals and aimed to revolutionize traditional monetary and financial institutions, including central banks.

The founding whitepaper, published on October 31, 2008, was authored by Satoshi Nakamoto, a pseudonym whose true identity remains unknown.