Bitcoin loses yearly gains: Why and what next?

- Bitcoin and other cryptocurrencies are no longer “a hedge against market risk” and “now more closely track the rest of the market,” says UC Irvine’s Bill Maurer

- ‘There have been six episodes where Bitcoin dropped by more than 60% – so fasten your seatbelt. However, one commonality is that Bitcoin recovered and continued to appreciate every time,’ says Duke University professor Campbell Harvey

ISTANBUL

As global markets reel from renewed US tariffs, persistent inflation fears, and fading hopes for deeper interest rate cuts, the volatility sweeping traditional finance is now hitting the cryptocurrency world – dragging Bitcoin back below its starting level for the year.

Experts say the sharp reversal reflects a broader shift: crypto no longer behaves like an alternative safe haven, but moves increasingly in sync with macroeconomic uncertainty.

Bitcoin and other cryptocurrencies are no longer “a hedge against market risk,” and “now more closely track the rest of the market,” said Bill Maurer, director of the Institute for Money, Technology and Financial Inclusion at the University of California, Irvine.

“This is because of increasing uncertainty across the markets, because of all the chaos unleashed by trade wars, inflation, geopolitical fears, worries about the Fed not further cutting rates in the US, a wobbly jobs market, etc.”

Investors are de-risking across the board, he added, and “what was always a volatile market for crypto is now more so.”

Campbell Harvey, professor of finance at Duke University’s Fuqua School of Business, echoed the point: “In a risk-off situation, people dump their risky assets like stocks and bitcoin. That’s what is happening today.”

But he argues there is another shift underway: “People are realizing that there is more to the crypto space than Bitcoin.”

Bitcoin’s 2025 rally wiped out

The cryptocurrency market had climbed steadily after US President Donald Trump began his second term in January, promising to make the US “a crypto heaven.” But that optimism faded as trade tensions flared.

Bitcoin – which began the year at $93,540 – fell to $74,500 in April, weighed down by uncertainty surrounding Trump’s reciprocity-based tariffs. It rebounded when tariff anxieties eased and the Federal Reserve began signaling interest rate cuts, surging to a record high of $126,200 in October. At that peak, Bitcoin’s year-to-date gains topped 35%.

However, the rally proved short-lived. With rate-cut expectations weakening and global markets turning risk-averse, Bitcoin slipped sharply, hitting around $89,000 on Wednesday – its lowest level since April, and below where it started the year. The drop erased all of Bitcoin’s 2025 gains.

Bitcoin has lost 15.14% over the past month, and 6.3% over the last year. As of Thursday (0745GMT), it was trading at $92,020, down around 2.2% year-to-date.

Ethereum, which ranks second in terms of market capitalization, mirrored the decline, falling to $3,030 after starting the year at $3,345.

A weekly report from blockchain analytics firm Glassnode said Bitcoin is now entering “a period of consolidation,” noting oversold conditions and slowing investor outflows. “The emergence of exhaustion signals suggests the market may be forming a local bottom around the $94K-$100K range,” it added.

‘Fasten your seatbelt’: Volatility is nothing new

While the recent fall has rattled investors, Harvey says the pattern is familiar.

“Historically we have seen multiple episodes of large drawdowns in Bitcoin. There have been six episodes where Bitcoin dropped by more than 60% – so fasten your seatbelt,” he said. “However, one commonality is that Bitcoin recovered and continued to appreciate every time.”

Yet he noted that the conversation in the digital asset space is shifting toward stablecoins – digital currencies backed by assets like the US dollar – which he calls the “first killer app” of crypto and “has nothing to do with Bitcoin.”

Harvey also pointed to backlash over corporate investment schemes: “I think there was a lot of negative reactions to these Digital Asset Treasuries like Strategy and the copycats. Why gamble a firm’s cash reserves and an asset four times as risky as the stock market?”