Despite institutional support, Bitcoin remains weak, testing investor confidence

• December 17, 2025
• |
• 09:57 (UTC+8)

The recent decline in bitcoin has unsettled the market not because of its large scale, but because of the environment in which it is occurring. This asset is weakening in conditions that would normally be expected to support it.

There have been no major exchange collapses, no harsh crackdowns from regulators, and no sudden loss of institutional investor access. Yet, the upward momentum has quickly faded, bitcoin's price is far below its October highs, and investors are being forced to reassess their recent expectations.

This week's sell-off intensified, with bitcoin dropping more than 5% in a single day and accumulating a year-to-date decline of about 7%. While this drop is not large compared to the sharp plunges of previous bear markets, the lack of a clear catalyst makes this move harder to interpret.

A Market No Longer Responding to Positive Signals

Over the past two years, the cryptocurrency market has undergone significant changes. Institutional investors have expanded their participation through regulated products, regulatory mechanisms have improved, and U.S. political sentiment has begun to shift in favor of digital assets. Earlier this year, bitcoin ETFs attracted billions of dollars, and corporate investors continued to increase their crypto holdings. In previous market environments, these factors would likely have supported sustained strength in crypto prices.

Instead, bitcoin has fallen sharply from its all-time high above $126,000 set in early October. Trading volumes remain subdued, ETF flows have turned negative, and there is very limited demand in the derivatives market to rebuild long positions. Even Michael Saylor's company, Strategy, continuing to buy has failed to halt the decline, highlighting the minimal new demand at current price levels.

According to Apollo Crypto portfolio manager Pratik Kala, given the many positive developments already in place, many investors had expected strong support, but the lack of follow-up buying has taken them by surprise.

Declining Participation Is Replacing Panic Selling

Unlike previous declines, the current drop is not entirely driven by panic or forced liquidations. While there was a wave of leveraged position unwinding in early October, which is estimated to have reduced risk exposure by $19 billion, leverage

leverage has not seen any substantial rebuilding since then. Funding rates remain subdued, and options markets are pricing cautiously rather than optimistically for upside potential.

This has led to a slow and gradual decline, rather than a sharp crash. Market participants seem willing to reduce their investments but are hesitant to re-enter, creating a price vacuum and causing prices to slowly drift downward as the market searches for demand.

Decoupling from the Stock Market Heightens Anxiety

Another notable feature of the current environment is bitcoin's divergence from traditional risk assets. The U.S. stock market continues to perform strongly, with the S&P 500 repeatedly hitting new highs, led by tech stocks. Bitcoin, which usually moves in tandem with high-growth stocks, has failed to keep up with this rally.

This divergence suggests that crypto-specific factors are currently dominating price action, and broader risk appetite alone is no longer enough to lift bitcoin prices. For some investors, this raises questions about how to allocate bitcoin in a diversified portfolio during periods of economic stability.

Long-Term Holders Exerting Selling Pressure

Adding to the price pressure is selling from long-term holders. Many bitcoin whales who bought at prices far below current levels are now selling into the rally, limiting the market's ability to absorb supply. While this behavior is not uncommon after a major surge, its impact is more pronounced when new buyers are scarce.

Kala points out that although the industry has achieved many regulatory and institutional milestones, price action has failed to confirm these achievements, reinforcing the recent cautious outlook.

Another Yearly Decline

If bitcoin ends the year down, it will mark its fourth annual decline in history. However, unlike previous down years, this drop is not triggered by crisis or collapse, but rather reflects the market's struggle to cope with slower capital turnover, reduced speculative leverage, and higher standards for market conviction.

For now, bitcoin appears to be transitioning to a more mature stage, where positive market sentiment alone is no longer sufficient to support its price. Unless there is a significant rebound in participation and demand, the market may remain under pressure even in the absence of obvious negative news.