Bitcoin has nearly halved since hitting a record above $126K in October 2026. It now trades between $60K and $67K, where it has remained stuck for months.
That prolonged slump isn’t being driven by a single problem. Four separate forces are weighing on Bitcoin, and most investors are only watching one.
Retail traders rotated to AI stocks
Individual traders and hedge funds have been dumping bitcoin and other tokens to chase AI stocks. The pivot accelerated after Trump's tariff threats on China in October triggered a selloff in riskier assets.
AI stocks, meanwhile, posted the kind of surges once associated with crypto. Trading platforms popular with crypto traders, including Hyperliquid, added AI derivatives, making the switch easier.
"What's happening in crypto is the purge is just getting started," said Mike McGlone, senior commodity strategist at Bloomberg Intelligence.
Some of this rotation is psychological. Investors who got rich on crypto cashed out into other assets entirely. Others concluded that bitcoin has simply matured past the point of explosive gains.
The hardware hack
On top of the retail exodus, a security breach shook one of crypto's core premises: that holding your own coins is safe. A firmware flaw in Coldcard wallets made by Canada-based Coinkite Inc. allowed attackers to predict the secret codes used to secure certain wallets.
The breach drained an estimated $130M of bitcoin without ever physically accessing the devices. Cold wallets had long been treated as the gold standard for security because they're kept offline. The Coinkite incident challenged that assumption directly.
The counterintuitive result: bitcoin ETF inflows hit their highest weekly level since April, pulling in more than $850M. Some longtime bitcoin holders appear to be trading direct ownership for the perceived security of a regulated wrapper.
"The marginal coin is migrating from self-custody into institutional wrappers where it becomes captive, allocated supply."
Rajiv Sawhney, Wave Digital Assets
The headwinds along the way
Serial bitcoin accumulator Strategy has flipped from buyer to seller. The company sold 1.69K BTC last week at an average price of ~$64K, below its average acquisition cost of ~$75K.
MSTR stock has declined 75% over the past 12 months. The company's forced selling adds consistent supply-side pressure at a time when buyer demand has already dried up.
The Clarity Act, crypto's top legislative priority, was supposed to shift most crypto trading outside the SEC's jurisdiction. Instead, the Senate delayed its vote until September at the earliest. Majority Leader John Thune cited ongoing disagreements between parties.
Democrats want restrictions on Trump's personal crypto dealings included in the bill. Some Republicans want limits on crypto companies paying yield, a demand pushed by community banks.
To clear a filibuster, the bill needs 60 votes, meaning bipartisan support is required.
"Nothing is dead until the year is up, technically speaking, but it's hard to see the issues that have come up being solved in the time they have left."
Chris Niebuhr, Beacon Policy Advisors
What investors are actually doing with crypto now
The response across the market has been a flight to structure. ETF inflows are rising even as prices fall. Advisers are pointing retail investors toward spot bitcoin and ethereum ETFs, which carry expense ratios of 0.15% to 1.5% and offer standardized tax reporting.
Some are looking at crypto index funds, infrastructure ETFs, or separately managed accounts. The 14 largest crypto ETFs collectively hold 92% of the $124.6B sitting across 128 funds.
Crypto currently is just consolidating into more traditional financial wrappers while the wilder edges of the market cool off.
