Cryptocurrencies have erased nearly all their year-to-date gains in just over a month. According to CoinGecko data, the total market capitalization of all cryptocurrencies peaked at a record $4.4 trillion on October 6 but has since declined by 20%, leaving the asset class with only a 2.5% gain for the year.

The downturn began days after the market hit its all-time high, triggered by the sudden liquidation of approximately $19 billion in leveraged positions, which shattered market confidence. Traders showed little appetite for betting on a rebound. This performance has surprised nearly everyone, especially in a year marked by growing acceptance of digital assets among regulators, global banks, and institutional investors.

Former U.S. President Donald Trump's push to position the country as a global crypto hub had previously fueled market activity, driving Bitcoin up by as much as 35%. However, the swift reversal in sentiment has been striking, with digital assets now valued below levels seen when Trump took office.

This week alone, Bitcoin has fallen 8%, potentially marking its worst weekly performance since March. The decline breached the 200-day moving average—a closely watched support level that had held firm since the 2022 bear market. At the time of writing, Bitcoin was trading around $100,500.

While the sell-off has been broad-based, the steepest losses have been concentrated in altcoins—smaller, more volatile tokens that have significantly underperformed this year. "Outside of Bitcoin and Ethereum, the crypto market has largely been weak in recent months," said Augustine Fan, partner at SignalPlus. "There’s been almost no fresh capital flowing into altcoins or decentralized finance (DeFi) projects."

Fan added that with few short-term catalysts and lingering concerns over security and regulation, mainstream investor participation is likely to remain subdued. Jeff Mei, COO of crypto exchange BTSE, attributed part of the downturn to "fears that AI stocks are severely overvalued." He warned, "If AI and tech stocks face a sell-off, Bitcoin could easily drop below $100,000, and altcoins may suffer even steeper declines."

Despite the gloom, there are signs of stabilization. After six consecutive days of net outflows, U.S. spot Bitcoin and Ethereum ETFs saw $253 million in inflows on Thursday.