Bitcoin has erased all of its price gains following the election of U.S. President Donald Trump, as renewed volatility across digital assets signals growing uncertainty among investors.
The downturn comes amid concerns over inflated technology valuations, shifting expectations for U.S. Federal Reserve policy, and persistently thin market liquidity that has amplified price swings.
After peaking above $125,000 in October, Bitcoin fell below $61,000 this week, its lowest level since before the election, before rebounding alongside broader equity markets.
The decline reflects a continuation of pressures that have been building for months rather than a sudden reversal, according to market analysts.
Analysts point to shrinking liquidity as a central driver of Bitcoin’s sharp and erratic movements.
"This contraction has been underway for several months and remains ongoing, suggesting it is likely to persist for some time," said Thomas Probst, a research analyst at Kaiko.
Bitcoin’s average 1% market depth has fallen steadily since October, meaning fewer coins are available for trading near the current price.
As a result, even modest trades now trigger outsized price moves, increasing volatility across the market.
The pressure intensified after Trump appointed Kevin Warsh as the next Federal Reserve chair, a move that fueled expectations of balance sheet reduction and tighter financial conditions.
Earlier liquidity was also washed out by October’s large-scale crypto liquidations following Trump’s announcement of new tariffs on Chinese imports.
Bitcoin’s surge last year was fueled by optimism that Trump’s return to office would usher in a more favorable regulatory environment for digital assets.
The administration moved quickly to reshape oversight at the Securities and Exchange Commission and establish a regulatory framework for dollar-pegged stablecoins.
Trump also signed an executive order creating a national bitcoin reserve using assets seized by the government, though large-scale purchases have not followed.
"It was created, but maybe it wasn't this kind of big moment... some of those people before the inauguration were kind of hoping for," said Denny Galindo of Morgan Stanley Wealth Management.
Despite the recent slump, some analysts believe selling pressure may be easing as large holders reduce distributions and investors weigh whether prices are nearing a bottom.