Bitcoin gets slashed in half. What’s behind the crypto’s existential crisis

Bitcoin tumbled toward $60,000 this week as investors reassessed its utility. And while there isn’t one clear catalyst driving the bloodbath, one thing is clear: the crypto market is in crisis. 

“There’s nothing going on in the marketplace that should have necessitated this type of a crash,” Anthony Scaramucci, founder and managing partner of alternative investment firm SkyBridge, told CNBC. “And so I think that’s made people, frankly, more fearful. … You have to ask yourself, ‘is it over for bitcoin?’”

Bitcoin fell as low as $60,062 on Thursday, bringing it to its lowest level since Oct. 11, 2024. That’s more than 52% off from its record high of $126,000 hit in early October 2025.  

The previous session marked one of bitcoin’s bloodiest ever, with the token shedding more than 15% on the day. Its daily relative strength index fell to 18, putting the asset in extremely oversold territory. As of Thursday, other digital assets like ether and solana were also down 24%  and 26% for the week to date, respectively — a sign investors’ confidence in the entire crypto market is faltering.

Bitcoin was rebounding on Friday, with the token last trading at $69,631.97, up more than 9% on the day.

But, its recent drawdown has prompted investors to re-evaluate its utility, including its role as a digital currency or as a store of value. Simultaneously, institutional appetite for the flagship crypto appears to be waning as spot bitcoin exchange-traded funds record outsized outflows, threatening to drive bitcoin deeper into the red. 

“This time is markedly different from other bear markets, however, in that it’s not in response to a structural blowup,” Jasper De Maere, desk strategist at crypto market-making firm Wintermute, said in a statement shared with CNBC. “It’s a fundamentally macro-driven deleveraging tied to positioning, risk appetite and narratives rather than systemic failures within crypto itself.”

Over the past few months, investors have grown increasingly skeptical of efforts to recast bitcoin as “digital gold,” or an alternative to traditional safe havens such as gold. Bitcoin is down 28% over the past 12 months, while gold is up 72% during the same period — a testament to the latter’s utility as a hedge against macro risks.

Conversely, bitcoin has often traded down alongside other risk-on assets such as equities amid periods of high macroeconomic and geopolitical uncertainty, raising doubts about its utility as a safe haven. Nearly a week after Trump’s “liberation day” tariff announcement on April 2, 2025, bitcoin had fallen about 10% to below $80,000, while the S&P 500 had declined roughly 4%. 

Separately, investors are also reassessing the extent to which financial institutions, treasury firms and governments are willing to adopt bitcoin — a major catalyst for the token in recent years. 

Large institutional outflows are mounting as investors brace for bitcoin to go lower, thinning liquidity for the token, according to a recent analyst note from Deutsche Bank.

Those outflows are also noticeable among spot bitcoin ETFs in recent months, according to the investment firm. The funds have seen outflows of more than $3 billion in January, in addition to roughly $2 billion last December and about $7 billion last November.

Additionally, a swath of Strategy copy-cats that emerged over the past year or so have slowed or paused their bitcoin purchases amid the digital asset’s correction.

Finally, traders have acknowledged that long-time efforts to market bitcoin as an alternative to fiat currencies have largely faded. While Steak ‘n Shake and Compass Coffee have rolled out support for bitcoin payments in recent years, initiatives to make the asset a form of payment have largely died, particularly as interest in dollar-pegged stablecoins grows, according to Bitwise’s Ryan Rasmussen. 

“We’re seeing Wall Street adopt stablecoins because it is a fundamental transformation of the way payments work, and bitcoin is just a different asset. It’s not meant for that today,” Rasmussen said, arguing that the token’s purpose has evolved from that of a currency to a decentralized, non-governable store of value. “I’ve never paid for coffee or a sandwich with Bitcoin, and I never will.”

And beyond those more immediate concerns, investors are also increasingly worried that bitcoin’s underlying network could be hacked, driving the token to zero. 

“It certainly is a risk that is seeing more attention from investors as they’re getting more worried about [it], and I think you’re seeing a little bit of that risk priced into bitcoin,” Rasmussen said.

He noted that Bitwise has allocated funds toward efforts to mitigate the threat from quantum computing.

Nevertheless, traders’ appetite for bitcoin has largely dwindled, denting its price. That’s true even as long-time believers are still proudly betting on bitcoin, despite of the charts and the naysayers. 

“I believe that the story is intact,” said Scaramucci, adding that he bought bitcoin for his fund on Thursday. “But, I don’t have a crystal ball. … Who the hell knows.”