Bitcoin's price has recently plunged below $60,000, a level not seen since October 2024. This sharp decline marks a significant correction, erasing gains made since the surge following Donald Trump's election in 2025. Several factors are contributing to this downturn, creating a perfect storm of uncertainty in the cryptocurrency market.

1. Macroeconomic Factors and Federal Reserve Actions

One of the primary drivers behind Bitcoin's recent struggles is the shifting macroeconomic landscape. Experts suggest that Bitcoin's failure to act as a safe haven amid a weakening dollar has amplified the impact of geopolitical instability and a fragile macroeconomic environment. The Federal Reserve's recent decision to hold rates steady, coupled with the potential appointment of Kevin Warsh, known for his hawkish stance, has further dampened investor sentiment. The market interpreted this as a signal that monetary policy easing may not be on the horizon, prompting a flight from risk-on assets like Bitcoin to fiat currencies. This is further compounded by the fact that Bitcoin is behaving like a volatile risk asset, rather than digital gold, causing investors to prioritize safety and income.

2. Market Microstructure Deterioration

Beyond the broader economic factors, internal dynamics within the cryptocurrency market are exacerbating the price decline. Analysts have pointed to a deterioration in market microstructure, characterized by increased volatility, a decline in liquidity, and a stronger correlation with stocks. Bitcoin's volatility has surged, returning to levels seen during previous market shocks. The correlation with the S&P 500 and NASDAQ indicates that during times of stress, cryptocurrencies are increasingly moving in sync with traditional assets, reducing their appeal as a diversifier. Moreover, liquidity is shrinking, making it harder to execute large trades without significantly impacting the price. This is demonstrated by the drop in liquidity in pairs with DOGE, which fell from $12 million to $10 million in just one month.

3. Institutional Selling and Forced Liquidations

Accelerating the losses is institutional selling, particularly forced liquidations. As Bitcoin's price fell below key technical levels, risk managers likely required the sale of assets to safeguard against further losses, creating a downward spiral. CNBC reported over $2 billion worth of crypto was liquidated on Thursday alone. This deleveraging, or forced closure of leveraged positions, indicates a shift in market sentiment from opening new trades to urgently closing existing ones. The derivatives market is witnessing a classic capitulation scenario, with trading volumes rising while open interest plummets. This suggests that many investors are cutting their losses and exiting the market, contributing to the sharp price decline.

In addition to these factors, an operational mistake by the South Korean-based cryptocurrency exchange Bithumb, which led to accidental deposits of large amounts of Bitcoin to user accounts, further contributed to the price crash. The incident triggered temporary price dislocations on the platform, with Bitcoin falling more than 10% below broader market levels.

While the current market conditions are undoubtedly challenging, some analysts suggest that the $60,000 price level could serve as critical support for Bitcoin. Historically, Bitcoin has experienced significant drawdowns before recovering, implying that the current price correction could be part of a cyclical pattern. However, uncertainty surrounding interest rates, potential regulatory changes, and geopolitical tensions suggest that volatility is likely to persist in the near term.