The October flash crash exposed how fragile bitcoin’s rally had become. It also illustrated a fundamental change in how BTC is perceived.
What to know:
- Bitcoin’s 2025 bull run was disrupted by a flash crash, revealing the volatility and unpredictability of digital asset trading.
- Institutional acceptance has shifted bitcoin from a fringe asset to part of the institutional macro complex, affecting its price dynamics.
- Despite optimistic forecasts, bitcoin ended the year significantly below expectations, influenced by macroeconomic factors and cautious capital.
Bitcoin’s bull run in 2025 was expected to be historic, with some industry experts suggesting the largest cryptocurrency would reach highs of $180,000-$200,000 by year-end.
Historic it was. Just not the way anyone thought.
It’s true that bitcoin punched to an all-time high earlier than most models projected, rising to over $126,200 on Oct. 6. But then, four days later, came a flash crash that sent the market reeling, exposing just how fragile and unpredictable trading digital assets can be.
Since then, bitcoin’s fallen 30% from the October record, and more than 50% below most 2025 forecasts. Far from shooting up, it dropped 6% this year, and spent most of the past two months stuck between $83,000 and $96,000, according to TradingView prices.
October’s crash caught traders off guard and wiped out months of leveraged bullishness in minutes. But it wasn’t a breakdown, according to Mati Greenspan, the founder of Quantum Economics, it was a rebalancing and a sign of the cryptocurrency’s growing acceptance by institutions.
Bitcoin was re-priced as a risk asset, not a revolution.
“The October 10 flash crash wasn’t a failure of bitcoin,” Greenspan said in an interview. “It was a liquidity event, triggered by macro stress, trade-war fears, and crowded positioning, that exposed how forward-loaded the cycle had become.”
The sudden change in behavior made forecasting nearly impossible, and made some of the space’s most recognizable analysts eat their words.
Read more: In 2025, bitcoin showed how spectacularly wrong price forecasts can be
As the year started, experts such Matt Hougan, Bitwise Asset Management’s chief investment officer, Mike Novogratz, Galaxy Digital’s CEO, Geoffrey Kendrick, Standard Chartered’s global head of digital assets research and others shared optimistic forecasts, but as it comes to a close and the dust settles, the reality is entirely different.
‘Cautious capital’
What happened? Simply put, bitcoin’s ideological roots were overtaken by its growing acceptance as an institutional asset. This shift changed how bitcoin was traded and evaluated by sophisticated investors from traditional markets.
‘What went wrong in 2025 is that bitcoin quietly crossed a threshold. It stopped being a fringe, retail-driven asset and became part of the institutional macro complex,” Quantum Economics’ Greenspan told CoinDesk. “Once Wall Street arrived, bitcoin began trading less on ideology and more on liquidity, positioning, and policy.”
With Wall Street’s involvement, bitcoin became more closely tied to macroeconomic events, which impact all asset classes. The cryptocurrency may still be pitched as a hedge against the Federal Reserve, but it’s now more sensitive than ever to Fed policy.
“Markets came into 2025 expecting faster, deeper Fed easing — and that simply hasn’t materialized,” said Jason Fernandes, co-founder at AdLunam. “BTC, like other risk assets, is paying the price for cautious capital.”
In addition, October’s liquidation cascade left both retail and institutional investors bruised.
“Derivatives-driven liquidations made for a choppy, unpredictable market where one batch triggered the next,” Fernandes said.” It’s no surprise ETF inflows dried up.”
From January through October, U.S. spot bitcoin ETFs attracted about $9.2 billion in net inflows, or around $230 million a week. But then the momentum reversed sharply. From October through December, the figures turned negative, with over $1.3 billion in net outflows, including a $650 million withdrawal in just four days in late December.
Quantum Economics’ Greenspan pointed to a fundamental Catch-22: “Bitcoin is often framed as a hedge against the Federal Reserve, yet in practice it still depends on Fed-driven liquidity.’” Since 2022, the Fed has been steadily withdrawing liquidity from the system, and this liquidity ultimately flows into risk assets, including bitcoin.