U.S. stocks closed lower across the board on Tuesday, extending a recent losing streak. Bitcoin is leading the way in losses. But why is this? Here is a look at why investors are growing increasingly worried.

What is Behind Bitcoin's Recent Plunge?

It was another rough day for the U.S. stock market on Tuesday. The Dow finished the trading day down 499 points, for a loss of 1.07%. The S&P 500 closed down 0.83% while the Nasdaq Composite fell by 1.21%. The S&P loss marks the longest daily losing streak for the index since August.

Bitcoin has been particularly volatile over the last few weeks. Only six weeks after hitting a record high of over $126,000, the cryptocurrency has tumbled by over 26%. Bitcoin was trading just below $93,000 on Tuesday, negating its gains over the year.

Investors have been skittish on risky assets in the market as of late, including crypto and volatile AI stocks. The uncertainty surrounding future interest cuts from the Federal Reserve is not making it any easier. Bitcoin is seen to be especially risky in today's economic climate.

Bitcoin is currently wading through a bear market, defined on Wall Street as when a price drops by over 20% from a recent high. According to CoinMarketCap data, Bitcoin has lost over $600 billion in market value during the slide.

The losses by Bitcoin are a sign of the overall attitude moving away from volatile investments. However, the cryptocurrency is not the only asset that is sliding. A number of tech and AI stocks finished the day Tuesday significantly lower as investors continue to question the aggressive spending plans from these companies. This includes Nvidia down 2.81%, Amazon plunging 4.43%, and Microsoft finishing the trading day down 2.7%.

As a whole, the tech-heavy Nasdaq is down 6.6% since its record high in late October. This equates to a loss of about $2.6 trillion in market value.

Compounding the uncertainty around Bitcoin is the fear that the investors may be looking to lock in their profits after the atypically high gains over the last few years. This pressure to sell has translated to a big hit for the cryptocurrency.

Political Climate Influence on Bitcoin

Bitcoin also took a hit when it suffered a flash crash on October 10. This crash was precipitated by President Donald Trump's renewal of the trade war with China. Prices of Bitcoin have been more vulnerable to normal market swings since this time.

The rapid descent of Bitcoin seemingly came out of nowhere. The currency had enjoyed a strong year up until the last six weeks. For example, Bitcoin was trading at about $69,000 ahead of last November's presidential election before shooting up about 83% to its record high in early October.

Bitcoin first eclipsed $100,000 in December of 2024, shortly after Trump was elected to a second term. The currency surged when Trump signaled that he was going to support crypto-friendly regulations. The White House has since loosened government oversight of the currency, pushing for pro-crypto policies. For example, the GENIUS Act was passed through Congress and signed into law over the summer, offering a new set of friendly regulations for stablecoins.

The president recently appointed pro-crypto regulator Paul Atkins to serve as the chair of the Securities and Exchange Commission (SEC). Investors also now enjoy easier access when looking to buy or sell cryptocurrencies.

While Bitcoin has lost all of its gains over the last year in the past several weeks, the rest of the stock market is largely flourishing by comparison. For instance, the benchmark S&P is now up 12.5% for the year. Gold prices have soared by 54%.

Although tech stocks have been shakier than the stalwarts, investors are still aggressive about buying in the dip. Nvidia is a good example of this. After falling as much as 3.36% on Friday, a flurry of activity sent the stock to finish the day up 1.77%.

Conversely, Bitcoin has yet to see a significant rebound. Many financial analysts believe that the positive catalysts for the crypto market are already baked in, stymying the overall growth. Other investors still see much promise in cryptocurrency, noting that this is a good opportunity to buy before it starts climbing. These optimistic investors point to the fact that Bitcoin's trading cycle is still intact, signaling that this is just a normal and temporary dip that can be ridden out.

One thing that is certain is that Bitcoin's performance over the next few weeks will be something closely monitored by investors and analysts looking to determine if all risky investments are under threat of underperforming.

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