Deutsche Bank sees Bitcoin selloff as fading conviction

08:20

By: Dakir Madiha

Deutsche Bank sees Bitcoin selloff as fading conviction

Deutsche Bank analysts attribute Bitcoin's sharp decline this year not to a single macroeconomic shock but to a gradual erosion of institutional and regulatory confidence. In a note released Wednesday, they highlighted three key drivers: sustained outflows from spot Bitcoin exchange-traded funds, a breakdown in the cryptocurrency's correlations with traditional assets, and stalled progress on comprehensive crypto legislation in Congress. The price has dropped over 40% from its October 2025 peak, marking the fourth straight monthly loss the longest such streak since before the pandemic.

Institutional selling exerts the most immediate pressure. U.S. spot Bitcoin ETFs have seen massive and persistent outflows since October, totaling more than $7 billion in November, around $2 billion in December, and over $3 billion in January. By early February, these funds had shed about $6 billion in net capital since late 2025, the longest sustained redemption period since their launch. "These steady sales signal that traditional investors are losing interest and broader pessimism toward cryptocurrencies is deepening," the analysts wrote. The resulting supply-demand imbalance floods the market with roughly two months of new mining output monthly, forcing other buyers to absorb the excess.

Bitcoin's role as "digital gold" faces scrutiny. While gold surged over 60% in 2025 on central bank purchases and safe-haven demand, Bitcoin ended the year down about 6.5%, noted analysts Marion Laboure and Camilla Siazon. Its correlation with stocks has fallen to mid-teen levels, far below past selloffs when it mirrored tech shares closely. Regulatory uncertainty compounds the issues. The bipartisan Digital Asset Market CLARITY Act remains stuck in Congress amid disputes over whether exchanges and third parties can offer yields on stablecoin holdings. A White House summit this week failed to bridge the gap between banks and crypto firms. Deutsche Bank says this legislative pause has reversed prior market stability gains, pushing 30-day Bitcoin volatility above 40%. The bank's surveys show U.S. consumer crypto adoption slipping to around 12% from 17% mid-2025.

Deutsche Bank cautions against overinterpreting the downturn. Even after this pullback, Bitcoin trades about 370% higher than early 2023 levels, reflecting the speculative premium built during the rally. "This phase represents a correction rather than a collapse a test of whether Bitcoin can mature beyond belief-driven gains and regain regulatory and institutional support," the bank stated.