After a week-long slump erasing hundreds of billions in market value from the digital asset space, Bitcoin has once again failed to live up to its reputation as a "safe-haven asset."

Once seen as a hedge against market turmoil—dubbed "digital gold" in the blockchain era—Bitcoin continued to decline in early London trading on Friday, dropping as much as 3% and falling below the $105,000 mark. The world's second-largest cryptocurrency, Ethereum, saw its price dip below $3,800, down over 20% from its peak in August.

Meanwhile, Binance-related token BNB plummeted by as much as 11% on Friday. Analysts noted that Binance, the world's largest cryptocurrency exchange, was a key driver behind a record clearing event from October 10 to 11, during which users faced platform technical issues and pricing discrepancies. In response to the recent downturn, Binance has provided nearly $600 million in compensation to individual and corporate clients.

Just on October 6, Bitcoin had reached an all-time high of $126,251. However, in the days that followed, escalating trade tensions between the U.S. and China triggered over $19 billion in liquidations, while the vast majority of mainstream cryptocurrencies faced significant sell-offs.

Currently, despite industry giants like Kraken, Circle, BitGo, and Ripple advancing into regulated financial sectors—applying for trust licenses, developing payment channels, and launching credit card products—the cryptocurrency market continues to struggle with achieving a lasting recovery.

"It's notable that the timing of this plunge coincides with industry titans applying for banking licenses," said Rachael Lucas, an analyst at BTC Markets. She added that the move towards traditional financial infrastructure marks "a strategic hedge against volatility aimed at building industry legitimacy."

The risks stemming from U.S.-China trade tensions continue to plague various risk assets, including cryptocurrencies. The bankruptcy of First Brands Group and Tricolor Holdings has reignited fears over hidden credit losses; meanwhile, Zions Bancorp and Western Alliance saw their market values evaporate by over $100 billion in a single day due to loan-related fraud write-offs.

On Thursday, as risk-averse sentiment swept through the market, investors pulled a net $593 million from Bitcoin and Ethereum exchange-traded funds (ETFs) listed in the U.S. Over the past 24 hours, the put/call ratio for Bitcoin on the crypto derivatives platform Deribit surged to 1.33, indicating that investors are ramping up hedging operations against further price declines. Put options provide downside protection by giving holders the right to sell assets at a predetermined price.

Against the backdrop of traditional safe-haven assets like gold and silver reaching new highs, Bitcoin's performance has been disappointing. In the week ending October 12, Bitcoin saw a decline of up to 6.3%, marking its largest weekly drop since early March, with no signs of a rebound. The majority of cryptocurrencies have followed a similar path.

"I think the key point is that cryptocurrencies act like 'canaries in the coal mine'—a warning signal indicating that the market is under strain due to emerging credit concerns," said Matthew Hougan, Chief Investment Officer at Bitwise.