Bitcoin has dropped to around $57,700-$59,800, hitting its lowest level in about 20-21 months, before recovering slightly during US trading. Even after the small recovery, Bitcoin remains more than 50% below its record high of over $126,000 reached in October 2025.
Investors are worried because the US Federal Reserve is still focused on bringing inflation back to its 2% target, according to GuruFocus. Last month, Federal Reserve Chairman Kevin Warsh said the central bank would not tolerate high inflation. On Tuesday, Cleveland Fed President Beth Hammack told CNBC that interest rate hikes may still be needed to control inflation.
Why do higher interest rates hurt Bitcoin?
When interest rates stay high, investors usually move money into safer assets like US government bonds, which offer returns. Bitcoin does not pay interest or dividends, so it becomes less attractive when safer investments offer better returns. Higher rates also strengthen the US dollar, which often puts pressure on risky assets like cryptocurrencies.
Investors pull money out of Bitcoin ETFs
Another major reason behind Bitcoin’s fall is the heavy selling in US-listed spot Bitcoin ETFs. Investors withdrew more than $4 billion from US-listed Bitcoin ETFs in June, marking the largest monthly outflow since the funds launched two years ago. According to KuCoin, institutional investors stopped buying Bitcoin and later started selling, removing one of the market’s biggest sources of demand. ETF holdings growth has slowed to almost zero after several weeks of continuous outflows.
During the 2024-2025 rally, large institutions buying Bitcoin through ETFs helped push prices higher. Now that many of those investors have stepped back, Bitcoin has lost one of its strongest supporters. Without steady institutional buying, many price rallies have quickly faded.
Money is moving into AI stocks instead of crypto
Investors are also shifting their money into artificial intelligence companies and major IPOs instead of cryptocurrencies. The KuCoin report said record IPOs and the AI boom have attracted capital that previously flowed into crypto markets. This shift has reduced demand for Bitcoin and other digital assets.
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Strategy is adding fresh uncertainty
Strategy Inc., formerly known as MicroStrategy, is the world’s largest corporate holder of Bitcoin. Investors are closely watching the company because its decisions can influence confidence in the crypto market. Strategy recently announced a new financing plan that includes share buybacks, building a larger cash reserve and allowing it to sell up to $1.25 billion worth of Bitcoin if needed, according to Reuters.
While investors initially welcomed the stronger financial position, attention has now shifted to the company’s increased flexibility to sell Bitcoin instead of only buying it, according to GuruFocus.
According to Reuters, Strategy’s enterprise value has fallen below the value of the Bitcoin it owns for the first time. The company’s mNAV ratio has dropped to 0.99, meaning its enterprise value is now lower than the value of its Bitcoin holdings. Investors have watched this closely since CEO Phong Le said last year the company may consider selling bitcoins if the ratio drops below 1. Strategy earlier this month also reported its first Bitcoin sale since 2022.
Nic Puckrin, cross-asset analyst and founder of Coin Bureau, said, “This is a responsible move from Saylor, and the market is seeing it as a positive development”, according to Reuters.
However, Andrei Grachev, managing partner at DWF Labs, warned, “From here there are two paths: Strategy starts selling bitcoin, or its shares fall far enough that someone buys the stock to take control and get the bitcoin below market value”, according to Reuters. He added, “Either way, for serious investors that uncertainty itself becomes a reason to wait — and for now, money is flowing into AI, not crypto.”
Technical indicators are also looking weak
Bitcoin has fallen below its 200-week moving average, an important technical level that many traders watch. Falling below this level can sometimes signal a longer bear market.
According to KuCoin, leveraged traders have been forced to sell after prices dropped sharply. The report said one day in late June saw around $397 million worth of forced liquidations, with more than 80% coming from long positions. These forced sales increased the downward pressure on Bitcoin.
$10.5 billion worth of Bitcoin options expired in June, weakening support around the $60,000 level. That made it easier for prices to fall further.
Bitcoin’s fundamentals have not changed
Despite the sharp fall, Bitcoin’s fixed supply and long-term adoption story remain unchanged. According to the reports, the recent decline has been driven mainly by money flowing out of the market, not because Bitcoin itself has fundamentally changed.
Bitcoin has recently recovered above $61,000, while Ethereum, Solana and XRP have also posted gains. The KuCoin report says spot Bitcoin ETFs have now recorded five straight days of inflows, led by BlackRock’s IBIT. BlackRock’s new staked Ethereum fund attracted $100 million on its first day, suggesting institutional investors are slowly returning.
The Fed may also be becoming less aggressive
Kevin Warsh recently signalled that inflation risks had eased, marking his first dovish comment since the June Fed meeting. Investors viewed this as a positive sign because lower inflation could reduce the need for future rate hikes.
Bitcoin is falling because high inflation concerns have kept the Federal Reserve hawkish, making investors avoid risky assets, according to GuruFocus. Large investors have also pulled billions of dollars out of Bitcoin ETFs, reducing demand for the cryptocurrency.
At the same time, money has shifted into AI stocks and major IPOs, while uncertainty surrounding Strategy’s Bitcoin holdings has further weakened investor confidence. Although there are early signs of recovery, analysts say the market will need consistent ETF inflows, improving Fed expectations and stronger technical signals before a sustained rebound can be confirmed.
