Crypto is Cooling Down: Over $1 Trillion Wiped Out in Six Weeks

After an euphoric October, when Bitcoin was breaking new records above 120,000 dollars, a brutal reality check followed. In just a few weeks the price slipped below 90,000 dollars, erasing almost all gains made in 2025. Even worse, the overall crypto market has lost more than 1 trillion dollars in value.

For someone who bought at the top this looks like the end of the world. For more experienced players it is “just another cycle”. In this article we look at what exactly happened, why this drop is also connected to the story about an AI bubble, and how a small investor can survive a phase like this.

Red bear and candlesticks on a chart symbolizing a bear market in the crypto market in 2025

What Is Happening With the Bitcoin Price?

If we zoom in on only the last few months, the picture looks roughly like this:

  • early October: Bitcoin races towards new all-time highs above 120,000 dollars;
  • October 10: a sharper reversal starts and a wave of liquidations hits over-leveraged positions;
  • mid-November: BTC falls below 90,000 dollars for the first time since April;
  • result: almost the entire yearly gain is “eaten” within a few weeks.

The full market picture is even more dramatic:

  • total crypto market capitalization at the beginning of October was close to 4.3 trillion dollars,
  • within six weeks it dropped towards the 3.2 trillion zone,
  • meaning that more than 1 trillion dollars of nominal value was wiped out.

A large part of the shock came from derivatives and excessive leverage. In a single wave, tens of billions of dollars in long positions that were betting on “eternal growth” were liquidated. Forced selling from liquidations then pushes the price even lower and creates a domino effect.

In other words, this is not a tiny “dip”, but one of the stronger corrections since 2017/2018.

Why Is This Happening Right Now?

At first glance it looks like a classic crypto crash, but in the background there are several serious factors.

From Risk-On to Risk-Off

After months of rising tech and AI stocks, the market started to fear that:

  • the AI sector is in a bubble,
  • expectations about fast interest-rate cuts might be too optimistic,
  • the global economy is under more pressure than it appears at first glance.

When investors reduce their risk exposure, the first to be hit are:

  1. the riskiest tech stories (young AI companies, growth stocks),
  2. crypto – especially altcoins, but also Bitcoin itself.

That is why we are now seeing simultaneous declines in AI leaders and in crypto. Bitcoin behaves like a high-risk tech asset, not like a completely “separate world”.

The AI Bubble as a Detonator

Many serious institutions now openly talk about a potential AI bubble:

  • valuations of AI companies and chip makers look overheated,
  • huge amounts of money are flowing into data centers and GPU purchases,
  • there is growing fear that the pace of investment may not pay off the way people expect.

When the bubble narrative appears, investors often “cut” everything that looks too hot. Both AI and crypto fall into that basket.

Macro Story: Rates, Dollar, Geopolitics

On top of all that we have:

  • fading expectations that central banks will quickly start cutting interest rates,
  • a stronger dollar,
  • geopolitical tensions that push capital into “safer” asset classes.

In such an environment, crypto is a natural candidate to be sold off.

How Can a Small Investor Survive a Bear Market?

This is not a “buy now, moon tomorrow” type of advice, but a practical framework for survival.

Don’t Try to Catch a Falling Knife

If you are only now realizing the scale of the drop and are opening the chart in shock, the worst thing you can do is make a panic decision in a single day. Instead:

  • look at your real exposure,
  • decide whether you are ready to hold the position for 2–3 years,
  • if not, it is better to reduce risk according to a plan than to rely on hope.

DCA and a Healthy Portfolio Structure

One of the simplest strategies is:

  • DCA (dollar-cost averaging) – small, regular buys without trying to hit “the absolute bottom”,
  • keeping part of the portfolio in more stable investments or stablecoins,
  • avoiding situations where 100% of your net worth is in crypto.

The goal is not to “hit the jackpot”, but to stay in the game long enough to get a meaningful return.

No Leverage and No All-In Moves

If this drop caught you with 5x or 10x leverage, you have probably already seen what forced liquidation feels like.

For most small investors, especially in a bear phase:

  • leverage is basically a lottery ticket with bad odds,
  • going all-in on a single crypto narrative is the fastest way to run out of ammo before the next bull run.

The speculative part of the portfolio should be small and clearly separated from long-term investing.

Conclusion

In the last six weeks, the crypto market has gone through one of the harshest declines of the past decade. More than 1 trillion dollars has been erased from total market capitalization, and Bitcoin has lost almost all of its yearly gains. On top of that, the entire market is overshadowed by talk of a possible AI bubble and a broader risk-off mood.

It is probably not “the end of crypto”, but it is very likely the end of yet another phase of euphoria. After such phases, only those who have a plan, patience and respect for risk tend to survive.

If you want to go deeper, check out our guides on the basics of Bitcoin, long-term investing strategies without leverage, and our analyses of the AI sector, which is currently closely tied to sentiment in the crypto market.

Disclaimer: This article is for informational purposes only and does not constitute financial, investment, legal or any other type of professional advice.