A trillion dollars evaporates from the crypto market… Who will pay the price for the sharp decline in digital currencies?
A trillion dollars evaporates from the crypto market… Who will pay the price for the sharp decline in digital currencies?
2025-11-21 02:44
Shafaq News – Baghdad/Washington
Special analysis
In the middle of this week, traders in New York, London and Singapore were staring at almost the same screens: a green line that broke through the $120,000 barrier for Bitcoin in early October, then curved sharply downwards today, November 21.
In just six weeks, more than $1 trillion in cryptocurrency market capitalization evaporated, plummeting from approximately $4.2 trillion to less than $3 trillion – roughly a quarter of the market. Bitcoin alone has lost more than 30% of its value since its record high above $126,000 on October 6th, according to data from financial institutions and market tracking websites.
Despite these losses, industry executives point out that the primary currency is still, in their view, undergoing a “hard correction” rather than a complete collapse of the model. However, the figures, the new tone of central banks, and the sharp fluctuations in AI stocks paint a more complex picture of a market that has yet to establish itself as a safe haven.
From a peak of 126,000 to a global sell-off
The record surge in early October coincided with a euphoria in high-risk assets, as cryptocurrencies benefited from a more crypto-friendly US administration and regulatory approval of Bitcoin-linked exchange-traded funds.
But within weeks, the landscape changed. Data from research institutions and major economic newspapers documented what became known among traders as “October 10th,” when US President Donald Trump’s threats to impose 100% tariffs on Chinese imports led to a wave of forced liquidations of leveraged short positions exceeding $19 billion in twenty-four hours.
On that day, Bitcoin plummeted from levels exceeding $122,000 to nearly $105,000, smaller currencies suffered even steeper losses, and millions exited funded positions on trading platforms around the world.
Since then, the market has continued its intermittent decline. Consistent reports from Western financial newspapers indicate that the total market capitalization of digital assets has fallen by more than $1.1 to $1.2 trillion in 41 days, and that Bitcoin has practically erased most of its gains accumulated since the beginning of 2025.
Beyond the tariffs and the Twitter wars, another factor was creeping in to create a new mood in the markets. Dovish statements from several US Federal Reserve officials reduced investor bets on an imminent interest rate cut and indicated that inflation remained above desired levels. These signals increased the cost of holding non-income assets like cryptocurrencies and drove funds toward bonds and gold.
Meanwhile, major stock indices such as the S&P 500, Germany’s DAX, and Japan’s Nikkei all saw significant declines, while London’s FTSE 100 recorded its biggest daily drop since April. Much of this loss was concentrated in artificial intelligence and technology companies with high valuations, whose prices senior bankers warned reflected a “degree of irrationality.”
With each sell-off in these sectors, cryptocurrencies have moved in roughly the same direction, seemingly confirming that investors now classify Bitcoin more as high-risk growth stocks than as “digital gold” detached from the volatility of traditional financial markets.
Bitcoin funds: From an upward engine to an exit channel
While the individual investor is the most visible player in this story, the data reveals another influential player operating behind the scenes. Bitcoin-linked exchange-traded funds (ETFs), touted two years ago as the bridge between the crypto world and institutional capital, have this month become one of the most significant exit points.
Reports from specialized agencies and financial analysis platforms show that Bitcoin funds listed in the United States experienced net outflows of nearly $3 billion to $3.8 billion in November alone, their worst month since their launch.
The iShares Bitcoin Trust, managed by asset management giant BlackRock, spearheaded this exodus. In a single day, investors withdrew more than $523 million from the fund, the largest single-day redemption since its launch. Other data indicates that BlackRock alone accounts for over $2 billion of the net outflows this month.
For asset managers who have for years called for the “normalization” of crypto through regulated instruments, these figures test the claim that the influx of institutional capital will make the market more stable. In practice, these new channels have also facilitated a rapid mass exit when sentiment shifted.
Beyond the headlines about interest rates and fees, the October surge reminded experts of a simpler truth: the crypto market is heavily reliant on leverage and short-term derivative positions. Research reports from investment firms and data platforms show that over $19 billion in funded positions were forced to liquidate within 36 hours during the turbulent days of October 10th and 11th, marking the largest such surge in the market’s history.
This classic spiral worked as follows: an initial price drop on the back of a political shock, then many short positions hit stop-loss levels, so funded buy orders turned into forced sell orders, generating another series of liquidations. Although Bitcoin and Ethereum maintained historically high levels, smaller cryptocurrencies experienced near-total collapses in some cases.
In a recent comment, Binance CEO Richard Teng said that what is happening with Bitcoin is “part of a normal cycle in risky assets,” noting that the market is going through a risk reduction and profit-taking phase after a strong performance over the past 18 months, and that the current volatility is not limited to crypto alone but includes other asset classes.
Who loses now?
The losses are spread across a wide range of players. Reports from economic news agencies indicate that millions of positions have been closed at a loss since the beginning of the downturn, and that tens of thousands of individual traders have suffered complete liquidations within a few trading sessions.
On stock exchanges, shares of crypto-related companies, such as brokerage and mining platforms, have fallen more than the market average. Data from US news agencies shows that shares of companies like Coinbase and Robinhood lost more than 20% of their value in November alone, and some mining companies lost half their value in a single month.
Holders of smaller, riskier cryptocurrencies are facing the hardest hit due to the low liquidity and market depth of these assets. Specialized reports indicate that the declines in some of these cryptocurrencies are double those of Bitcoin, and that some institutional portfolios have decided to completely close their exposure to them for the time being.
So far, the correlation between crypto and traditional banks appears limited. However, the pace of this correlation is accelerating through three main channels: exchange-traded funds (ETFs), banks that offer custody and liquidation services for digital assets to their clients, and listed companies that hold significant amounts of Bitcoin on their balance sheets.
Where does the compass point?
Bitcoin options markets are currently reflecting a cautious pessimism. Data from derivatives platforms shows a rise in traders’ bets that the cryptocurrency will end the year below $90,000, compared to lower probabilities of it returning above $100,000 before the end of 2025.
At a time when analyses from investment banks and research centers have outlined three general scenarios, the first is that the price will stabilize within a broad range between $70,000 and $100,000 over the coming months, with institutional demand remaining, albeit cautiously. The second is a more pessimistic scenario if the global economy enters a severe recession, which could push Bitcoin to levels significantly lower than current prices. The third is an optimistic bet that the easing of fears about an artificial intelligence bubble and the start of an interest rate cut cycle will bring some of the flows back into crypto and raise prices again above $100,000.
Meanwhile, some of the currency’s biggest believers continue to buy. Published data on listed companies that invest in Bitcoin shows that one of them added more than 8,000 new coins to its holdings in recent weeks, betting that the current dip is just another stop in a longer cycle.
On traders’ screens, the price moves within a narrow range, up and down. For some, this is just another opportunity to try and “buy the bottom.” For others, the currency that was promised to be an alternative to the traditional financial system is still operating at roughly the same pace. The difference is that the volatility here is faster, and misreading the trend could cost years of savings overnight.
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