Economist Saul Eslake explains why Bitcoin plunged 30% after record highs in October. From Trump’s 100% tariff shock to margin calls and ETF outflows, Eslake unpacks the forces driving crypto’s volatility and asks whether Bitcoin can scale new heights.

Hundreds of billions of dollars have been wiped off bitcoin’s value in recent weeks.

“Bitcoin is down almost 31 per cent from its peak in early October, having risen by about 22 per cent since President Trump was inaugurated in late January,” independent economist Saul Eslake said.

“I suspect that what’s behind it is a growing perception on the part of people who’ve previously bought bitcoin that it has run way ahead of any plausible interpretation of its potential value.”
He said this was most likely buyers who have “established positions in bitcoin or other cryptocurrencies with borrowed money”.

These leveraged investors can be asked to stump up cash if the value of the asset, in this case bitcoin, falls below a level the lender is comfortable with.

It is known as a margin call and can sometimes be fulfilled by selling the asset that was bought with borrowed money or by selling off other financial assets.

“[The drop has] reawakened concerns about a further wave of forced selling, amid worries that retail investors might need to liquidate other assets to meet margin calls,” Deutsche Bank said in a note to clients. Mr Eslake said this trading activity had seen billions flow out of bitcoin exchange-traded funds or ETFs.

“There’ve been ebbs and flows into and out of bitcoin-related and crypto-related ETFs over the course of this year, but it would now seem that those outflows are increasing in size and that’s why the price has fallen so much over the last few weeks,” he said.