The global cryptocurrency market capitalization is teetering on the edge of 2 trillion USD, effectively erasing most gains made since Donald Trump’s election as U.S. President. Analysts point to a perfect storm of factors: massive outflows from Bitcoin spot exchange-traded funds (ETFs), the Federal Reserve’s hawkish stance, a bullish U.S. stock market, and liquidity concerns surrounding Strategy, the world’s largest Bitcoin holder.
As of 1:00 p.m. on Monday, CoinMarketCap reported the global crypto market cap at 2.07 trillion USD. The past week saw a staggering 200 billion USD wiped off the market, pushing it dangerously close to the 2 trillion USD threshold.
The market cap hasn’t dipped below 2.1 trillion USD since September 2024, nearly 21 months ago. This effectively rewinds the clock to pre-Trump Rally levels, erasing gains made since his election last November.
Major cryptocurrencies are feeling the pain across the board. Bitcoin crumbled below the 60,000 USD mark on June 28, while Ethereum has been languishing under 1,600 USD since June 25.
Market watchers are pointing fingers at institutional investors’ exodus as the primary culprit. Last week saw a whopping 1.79 billion USD net outflow from global Bitcoin spot ETFs, marking the second-largest weekly exodus on record.
BlackRock’s iShares Bitcoin Trust (IBIT), the world’s largest Bitcoin spot ETF, bore the brunt of the selloff, hemorrhaging about 1.3 billion USD. This mass departure underscores a stark shift in institutional sentiment.
Even news of a ceasefire agreement between the U.S. and Iran failed to spark a market rebound. Reports indicate that both nations are set to discuss resolutions for the Strait of Hormuz dispute in Doha, Qatar, on Tuesday.
Industry insiders are also eyeing liquidity concerns at Strategy, the world’s largest corporate Bitcoin holder, as another factor dampening investor enthusiasm. Recent declines in both common and preferred share prices have made raising new capital more challenging, fueling speculation that the company might offload some of its Bitcoin holdings to shore up funds.
Financial analytics firm FarSide Investors noted that Strategy’s preferred shares (STRC) typically have a built-in price defense mechanism, increasing dividend rates when the stock dips below 100 USD. However, this safeguard appears to be malfunctioning. The firm suggests that realistic options include STRC share buybacks, new share issuances, or partial Bitcoin sales to secure dividend funds.
Jack Yi, founder of LD Capital, took to X (formerly Twitter) to suggest that Bitcoin has entered its third downward cycle since last October. He speculates that this correction could mark the final major dip of the current bear market.
Adding to the crypto market’s woes are the Federal Reserve’s hawkish monetary policy and the robust performance of U.S. equities.
Cryptocurrency trading firm QCP Capital summed up the situation: Market jitters over Strategy’s STRC, coupled with the Fed’s hawkish rhetoric, have sent investor confidence into a tailspin. It’ll need to see both macroeconomic improvements and fresh catalysts within the crypto space to break free from this downward spiral.
Matt Maley, chief market strategist at Miller Tabak, warned that a Bitcoin slide below 60,000 USD could further erode investor sentiment. He also highlighted how retail investors, once the driving force behind crypto bull runs, have shifted their focus to artificial intelligence (AI) and tech stocks, adding another layer of pressure to the market.
However, some analysts see a silver lining in potential regulatory clarity, which could spark a long-term market revival.
John Locke, an analyst at 22V Research, cautioned that Bitcoin could potentially plummet to 40,000 USD. However, he also offered a glimmer of hope, suggesting that the passage of the CLARITY Act in the U.S. could significantly reduce regulatory uncertainties, potentially catalyzing increased institutional participation in the crypto market.