Deutsche Bank says bitcoin’s selloff signals a loss of conviction, not a broken market

German lender Deutsche Bank (DB) says bitcoin’s $BTC$71,091.27 latest slide is less about a single macro shock and more about a slow erosion of conviction across institutional and regulatory fronts.

In a Wednesday note, the bank argued that three forces are weighing on the asset: sustained institutional outflows, a breakdown in bitcoin’s traditional market relationships, and a loss of regulatory momentum that had previously supported liquidity and volatility compression.

The current phase marks a reset rather than a collapse, a test of whether bitcoin can mature beyond belief-driven gains and regain support from regulation and institutional capital, the report said.

"While bitcoin’s recent price fall seems stark when viewed against its longer history, it reflects a retreat from highly speculative gains over the past two years, suggesting it still has room to mature," wrote analysts Marion Laboure and Camilla Siazon.

Despite its long-standing reputation as “digital gold,” bitcoin has diverged sharply from the traditional safe haven this year. While gold has rallied, up more than 60% in 2025 on persistent central bank buying and flight-to-safety demand, bitcoin has struggled, posting multiple monthly declines and underperforming key risk assets. Correlations with both equities and gold have eroded, leaving $BTC isolated as broader markets stabilize.

Since peaking in October 2025, crypto markets have entered a sustained downturn, with bitcoin falling more than 40% from its highs and posting its fourth straight monthly decline, a streak not seen since before the pandemic. Unlike previous macro-driven selloffs, this drop has occurred even as equities and gold have rebounded, underscoring weakening demand and fading momentum.

The most immediate pressure, according to the analysts, comes from institutional selling. U.S. spot bitcoin exchange-traded funds (ETFs) have recorded heavy and persistent outflows since October, including more than $7 billion in November, roughly $2 billion in December and over $3 billion in January. As institutions reduce exposure, trading volumes have thinned, leaving bitcoin more vulnerable to sharp price swings.

Sentiment data reinforces the trend. The Crypto Fear & Greed Index has fallen back toward “extreme fear,” while Deutsche Bank’s own surveys show U.S. consumer crypto adoption slipping to around 12%, down from 17% in mid-2025, a sign that enthusiasm is fading beyond Wall Street.

The analysts also highlighted bitcoin’s growing detachment from familiar market anchors. The asset has diverged sharply from gold, which gained 65% in 2025 while bitcoin fell 6.5%, undermining its “digital gold” narrative. At the same time, bitcoin’s correlation with equities has dropped to the mid-teens, far below levels seen in earlier macro-driven selloffs, when it typically moved in lockstep with tech stocks.

Regulatory uncertainty is the third headwind. Progress on the bipartisan Digital Asset Market CLARITY Act has stalled in Congress amid disputes over stablecoin provisions. Deutsche Bank said the pause has reversed earlier gains in market stability, with bitcoin’s 30-day volatility jumping back above 40%, near late-October levels.

Still, the bank cautioned against overreading the decline. Even after the drawdown, bitcoin remains roughly 370% higher than in early 2023, underscoring how much speculative premium had accumulated during the rally.

Wall Street bank Citi (C) said the world's largest cryptocurrency is trading below key ETF cost levels and is nearing its pre-election price floor as inflows to these vehicles fade and headwinds build, in a Tuesday note to clients.

Bitcoin was trading around $69,500 at publication time.

Read more: Bitcoin nears pre-election floor as ETF flows stall, Citi says