Cryptocurrency capitalization has fallen by more than $1 trillion. Is this the beginning of the "cryptozyme"?

Crypto market capitalization has shrunk by more than $1 trillion in recent weeks, with pressure on the market intensifying after a series of liquidations and bitcoin falling to a seven-month low. A sharp closing of leveraged positions, a surge in margin calls and a decline in new investor inflows have accelerated the sell-off. Analysts attribute the beginning of the collapse to the growth of negative factors - from threats of new duties from the U.S. to the general withdrawal of investors from risky assets. At the same time, experts note that the fundamental structure of the market remains stable, and bitcoin is increasingly showing itself as a macro asset sensitive to liquidity and risk appetite.

The total capitalization of the crypto market has decreased by more than $1 trillion in recent weeks. It is now about $3.2 trillion, although in early October it was at $4.3 trillion. At the same time, much of the decline was due to so-called paper losses: the fall in cryptocurrency prices has reduced the estimated value of assets, but the real outflow of funds was much smaller, as most holders did not fix losses by selling, Bloomberg writes.

A new wave of sell-off intensified on November 19, when bitcoin once again fell to local lows. At the moment, the largest cryptocurrency fell to $88,522, and the pressure was felt by all groups of investors - from retail, trying to "enter on the drawdown", to companies managing digital assets and losing premium to their shares, specifies Bloomberg.

By the evening of November 19, quotes partially recovered after a strong forecast of Nvidia's earnings, which slightly cooled fears of a possible weakening of the global boom of investment in artificial intelligence. At the time of publication of the material bitcoin is trading around $ 92,000, adding about 0.4%.

According to Bloomberg, the nearest psychological support levels for bitcoin are located around $85,000 and $80,000. Further, the market's attention is focused on the 2025 low of $77,424, recorded in April amid tariff turbulence.

After the wave of forced liquidations on October 10, when exchanges closed over $19 billion in leveraged positions, the vulnerability of the crypto market became especially clear. The price collapse triggered a chain reaction: triggering of margin calls, outflow of funds from exchange products and sharp cooling of demand from new investors, Bloomberg writes .

Eliezer Ndinga, head of research at 21Shares, attributes the start of the sell-off to U.S. President Donald Trump's announcement in October that he threatened to impose 100 percent duties on rare earth metals from China, Morningstar writes . Since the comment came just after U.S. stock markets closed on Oct. 10, Ndinga believes cryptocurrencies were the only highly liquid asset that investors could immediately sell to hedge risk. According to him, the fundamental conditions for the market remain strong, and what happened should be seen as a temporary episode.

"Investors are acting almost blind right now: there are no clear signals on the macro economy, so everyone is only looking at the behavior of large holders in the blockchain - and that's a major concern," notes James Butterfill, head of research at CoinShares.

For almost two years, the market has lived with new price records, massive inflows into crypto-ETFs and rising institutional demand, Morningstar analysts clarify. At the beginning of the year, bitcoin was just above the $126,000 level. Growth relied on two key drivers: expectations of a series of Fed rate cuts and increased demand from institutional investors. Now both drivers have weakened, and speculative buyers who played on the momentum have left the market. The fall is particularly painful for companies managing digital assets: their valuation was largely based on the previous rally, Bloomberg adds.

Whether the market is entering a new "crypto winter" or just cooling off after a busy year, the experts cited by Morningstar agree: bitcoin is increasingly behaving as a macro asset that responds to real returns, liquidity flows and general risk appetite - effectively becoming a full-fledged element of the global financial system.

Ether, meanwhile, fell back below $3,000. After lagging behind bitcoin in the first half of its rise, it eventually climbed to nearly $5000 in August, briefly surpassing its historic 2021 peak, but then lost all of that gain.

"I think we are now closer to the end of the sell-off than the beginning of it. But the market is nervous, and crypto assets may still have room for further declines before there is a solid basis for a reversal," said Matthew Haugan, investment director at Bitwise Asset Management.

This article was AI-translated and verified by a human editor