What Caused Bitcoin to Fall So Much? Expert Economist Lists 15 Reasons

Following the sharp decline in cryptocurrency markets, economist Alex Krüger published a comprehensive assessment of the reasons behind the recent pullback.

Krüger argued that the market’s loss of momentum was not due to a single factor, but rather a combination of both structural and macroeconomic elements.

According to Krüger, the process began with a sharp sell-off, which he described as the “October 10 massacre.” This was followed by a period of heavy euphoria, replacing the excessive optimism generated by the “Digital Asset Treasures (DAT)” model—strategies for holding crypto assets on company balance sheets—which weakened the market. Furthermore, the reversal of some large-scale fund flows following the US Department of Justice’s (DoJ) indictment against the Cambodia-based Prince Group also put pressure on liquidity.

Krüger argued that the recent surge in quantum computing discussions should not be ignored, asserting that this risk is “real.” He also stated that the enormous opportunities in artificial intelligence are diverting capital, talent, and even mining capacity away from cryptocurrency, creating a significant opportunity cost.

Krüger stated that Bitcoin’s increasing perception as an “American asset” is also affecting demand dynamics, noting that Chinese investors, who played a significant role in the rise of commodity markets, are showing less interest in cryptocurrency than before. Additionally, he argued that the increasing dominance of institutional investors and traditional finance in the market has led to crypto moving away from its “cypherpunk” and rebellious tech identity and transforming into an ETF-centric instrument. He concluded that cryptocurrencies are no longer “a space for the marginalized and geniuses,” but rather an item in 401k portfolios.

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Krüger also stated that the political risks associated with Donald Trump and the uncertainties that a potential Democratic administration change could create are also putting pressure on pricing. In addition, he said that there has been a lack of innovation, especially in the post-Hyperliquid era, and that the collapse of the memecoin craze in the Solana ecosystem has damaged investor confidence.

The oversupply in the market was also one of the main problems highlighted by Krüger. Citing CoinMarketCap data showing that the number of tracked cryptocurrencies has reached 29.91 million, the economist stated that a large portion of the tokens in the top 200 are overvalued and their technical charts have long appeared distorted. He also argued that the constant launch of new tokens often results in sharp crashes after short-lived rallies, with only insider investors profiting most of the time.

According to Krüger, the weakening of the “digital gold” narrative and sharp declines in some stock categories, such as software stocks, have also reduced appetite in the crypto market. He noted that in this environment, more aggressive selling is seen with every rise, while the appetite for buying at the bottom has significantly weakened.

On the macro front, Krüger noted that Kevin Warsh’s candidacy created a new turning point in the market, stating that because Warsh is a proponent of small balance sheets, expectations of quantitative easing (QE) and yield curve control (YCC) have been shelved, and instead, concerns about quantitative tightening (QT) have come to the forefront.

*This is not investment advice.

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