Crypto bloodbath saw $500B wiped out this week as ‘extreme fear’ grips markets

Crypto markets went through one of their worst weeks in three years, shedding roughly 14% in total market capitalisation and sliding back below the $3 trillion mark.

As of Friday, roughly $500 billion had exited the space in the past seven days.

Bitcoin alone plunged toward $82,000, deepening its month-long decline from record highs and reinforcing a brutal sentiment shift that’s left investors rattled.

Ethereum, XRP, and Solana all joined the downturn, compounding losses across the board as risk sentiment vanished.

By contrast, US equity markets experienced a milder pullback. The S&P 500 dropped 2.47% over the past five days, slipping from its recent peak to close at 6,547.57. 

The Dow Jones Industrial Average fell 2.71% over the same stretch, retreating by over 1,270 points to 45,794.35. 

The Nasdaq Composite, which had led earlier gains this quarter, took a sharper 2.83% hit, ending at 22,142.47.

While still in the red, these losses were modest compared to the carnage seen in crypto.

Interestingly, stocks began clawing back losses late in the week. Optimism resurfaced after New York Fed President John Williams signalled the possibility of a near-term rate cut, prompting markets to price in a 75% chance of a December policy easing, up significantly from just 40% the day before. 

This helped lift risk sentiment in traditional markets, allowing equities to stage a mini rebound into the weekend.

But that enthusiasm didn’t carry over to crypto as markets remained pressured by heavy liquidations and panic selling.

Why is the crypto market going down while stocks are recovering?

Much of this week’s downturn in the crypto market has been exaggerated by heavy liquidations and a sharp drop in investor demand. 

With traders already on edge from macroeconomic uncertainty, the market had little resilience left when selling pressure began to intensify.

The absence of fresh inflows, paired with elevated leverage, meant the correction quickly snowballed.

Several overlapping factors fueled this downward spiral. 

First, investors are questioning whether the Federal Reserve will actually deliver a rate cut in December. 

If the central bank decides to hold borrowing costs steady, that undercuts the appeal of riskier assets like Bitcoin, which offer no yield, especially when traditional options like bonds and savings accounts become more attractive. 

Second, there’s a visible rotation out of risk assets altogether, largely driven by scepticism around the sky-high valuations seen in AI-linked stocks.

That broader risk-off pivot has spilt over into crypto.

Compounding these concerns, geopolitical tensions have added weight to an already fragile market. 

Traders were spooked by tariff proposals backed by former President Donald Trump, which suggested import duties of up to 500% on countries still trading with Russia. 

At the same time, demand for US-listed spot crypto ETFs has also dried up. 

Bitcoin funds extended their outflow streak to a fourth consecutive week.

This week alone saw over $1.5 billion pulled from Bitcoin ETFs. 

Meanwhile, Ethereum ETFs also recorded over $2 billion in outflows across the last three weeks. 

These funds had been a major backstop for crypto prices in recent quarters, and their exodus sent a chilling signal that institutional demand may be fading.