Bitcoin News Today: Structural Weaknesses, Not Fundamentals, Drive Crypto's Volatile Collapse

The crypto market is grappling with renewed volatility as Bitcoin, Ethereum, and XRP plummet amid a confluence of thin liquidity, record leverage, and macroeconomic pressures. The total market cap has dipped below $3 trillion, with nearly $400 million in leveraged long positions liquidated in a single hour, underscoring the fragility of current conditions. Analysts attribute the selloff to structural weaknesses rather than fundamental shifts, warning that weekend trading sessions-traditionally marked by reduced liquidity-have amplified price swings.

Bitcoin fell below $86,744, while Ethereum and XRP dropped over 5% and 6%, respectively, as traders scrambled to unwind positions.

The collapse was exacerbated by a renewed trade war between U.S. President Donald Trump and China, which triggered a $19 billion flash crash on October 10. This panic-selling event forced margin calls, creating a cascading effect as investors sold holdings to meet obligations. The psychological impact of this event lingered, leaving the market more susceptible to further declines. "The normies are now treating Bitcoin like a volatile mainstream investment," said Steve Sosnick of Interactive Brokers, highlighting how institutional and retail investors' divergent risk profiles are reshaping market dynamics.

A pivotal factor is the influx of mainstream capital through newly approved U.S. spot bitcoin ETFs, which have injected billions into the market but also deepened its exposure to macroeconomic shifts. Deutsche Bank analysts noted that this year's downturn differs from past crashes, as institutional participation and global trends-such as Fed rate expectations-now play a dominant role. The Federal Reserve's potential rate cuts remain a double-edged sword: while lower rates typically boost risk assets, uncertainty over the pace of easing has left investors in limbo.

Compounding these issues is the AI sector's mixed performance. While AI-driven innovation continues to attract capital, concerns over overvaluation and regulatory scrutiny have spooked markets. Crypto, like tech stocks, is particularly sensitive to interest rate changes, and the specter of an AI bubble has further clouded investor sentiment.

Looking ahead, analysts suggest stability may return as liquidity improves and forced liquidations subside-typically a weekday phenomenon. However, Deutsche Bank cautioning that the market may not have yet bottomed out. For now, the interplay of leverage, macroeconomic volatility, and geopolitical tensions leaves crypto traders bracing for further turbulence.