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Deutsche Bank indicates that the decline in bitcoin’s value reflects a decrease in confidence rather than a malfunctioning market.
The German bank indicated that institutional outflows, diminishing liquidity, and stalled regulatory developments are the primary factors contributing to bitcoin’s decline.
Deutsche Bank states that the recent bitcoin selloff indicates a loss of confidence rather than a breakdown in the market. (Unsplash, modified by CoinDesk)
Key Points:
- Deutsche Bank noted that the downturn in bitcoin reflects outflows from institutional ETFs, reduced liquidity, and waning retail interest.
- The asset has become disconnected from both gold and stock markets, making it vulnerable in a risk-averse environment.
- Delays in regulation have rekindled volatility, complicating the path to a sustainable recovery, according to the bank.
According to Deutsche Bank (DB), bitcoin’s recent downturn is not primarily due to a singular macroeconomic shock but rather a gradual decline in confidence among institutions and regulators.
In a note released on Wednesday, the bank contended that three factors are impacting the asset: ongoing institutional outflows, a shift in bitcoin’s usual market correlations, and a decline in regulatory activity that had previously bolstered liquidity and reduced volatility.
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The current situation represents a reset rather than a total failure, testing whether bitcoin can develop beyond belief-driven surges and regain backing from regulatory frameworks and institutional investment, as noted in the report.
"While the recent decline in bitcoin’s price appears significant when compared to its longer history, it signifies a retreat from the speculative highs of the past two years, indicating there is still potential for maturation," analysts Marion Laboure and Camilla Siazon remarked.
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Despite its established status as “digital gold,” bitcoin has notably diverged from this traditional safe haven this year. While gold has surged, increasing over 60% in 2025 due to ongoing central bank purchases and demand for safety, bitcoin has faced challenges, recording several monthly declines and lagging behind important risk assets. Its correlations with both equities and gold have weakened, isolating BTC as broader markets find stability.
Since reaching its peak in October 2025, the cryptocurrency markets have experienced a prolonged downturn, with bitcoin dropping over 40% from its highs and recording its fourth consecutive monthly decline, a pattern unseen since prior to the pandemic. In contrast to previous macroeconomic selloffs, this decline has taken place even while equities and gold have recovered, highlighting diminishing demand and reduced momentum.
The analysts indicate that the immediate pressure is stemming from institutional selling. U.S. spot bitcoin exchange-traded funds (ETFs) have seen substantial and continuous outflows since October, including more than $7 billion in November, approximately $2 billion in December, and over $3 billion in January. As institutions lower their exposure, trading volumes have diminished, rendering bitcoin more susceptible to abrupt price fluctuations.
Sentiment indicators support this trend. The Crypto Fear & Greed Index has retreated toward “extreme fear,” while Deutsche Bank’s own surveys reveal that U.S. consumer crypto adoption has fallen to about 12%, down from 17% in mid-2025, indicating declining enthusiasm beyond Wall Street.
The analysts also pointed out bitcoin’s increasing detachment from established market anchors. The asset has sharply diverged from gold, which appreciated by 65% in 2025 while bitcoin decreased by 6.5%, challenging its “digital gold” narrative. Simultaneously, bitcoin’s correlation with equities has dropped to the mid-teens, significantly lower than the correlations observed in previous macroeconomic-driven selloffs, when it typically moved in tandem with technology stocks.
Regulatory uncertainty is the third challenge. Progress on the bipartisan Digital Asset Market CLARITY Act has stalled in Congress due to disagreements over stablecoin regulations. Deutsche Bank indicated that this pause has reversed earlier improvements in market stability, with bitcoin’s 30-day volatility climbing back above 40%, approaching late-October levels.
Nevertheless, the bank advised against overinterpreting the downturn. Even after the decline, bitcoin remains approximately 370% higher than early 2023 levels, emphasizing the extent of speculative premium accumulated during the previous rally.
Wall Street bank Citi (C) mentioned that the largest cryptocurrency is currently trading below crucial ETF cost levels and approaching its pre-election price floor as inflows into these vehicles diminish and challenges mount, according to a Tuesday note to clients.
Bitcoin was trading around $69,500 at the time of publication.
Read more: Bitcoin approaches pre-election price floor as ETF inflows stall, according to Citi
