Deutsche Bank Says Bitcoin Slide Signals Fading Investor Conviction

TLDR

• Deutsche Bank stated that bitcoin’s recent fall reflects a loss of conviction rather than a market collapse.
• The report pointed to heavy institutional outflows from bitcoin ETFs since October 2025.
• Bitcoin has fallen over 40% from its October peak and recorded four consecutive monthly declines.
• Correlation between bitcoin and traditional assets like gold and equities has sharply weakened.
• Gold prices have surged in 2025, while Bitcoin has failed to perform as a safe-haven asset.

Bitcoin’s recent decline reflects weakening institutional support and regulatory delays, according to a new report by Deutsche Bank analysts. While prices have dropped sharply in recent months, the bank views this downturn as a structural reset rather than a breakdown. The analysts identified institutional outflows, weak market relationships, and stalled regulations as the key drivers of the slump.

Bitcoin selloff driven by fading institutional demand

Deutsche Bank analysts said institutional capital continues to exit the market, applying downward pressure on bitcoin’s price performance. U.S. spot Bitcoin ETFs recorded over $7 billion in outflows in November, followed by $2 billion in December. January saw a further $3 billion exit, contributing to a liquidity drain and thinner trading volumes.

These conditions have left Bitcoin more vulnerable to steep swings as institutional liquidity diminishes. Since October 2025, bitcoin has lost over 40% from its peak, ending a four-month losing streak. This marks its weakest run since the pre-pandemic period.

The analysts described the drawdown as a “test of whether bitcoin can mature beyond belief-driven gains.” They noted that volatility returned, with 30-day fluctuations exceeding 40%, similar to late 2025 levels. Crypto sentiment also turned negative, as the Crypto Fear & Greed Index returned to extreme fear levels.

Weakening ties with traditional assets pressure sentiment

Deutsche Bank observed that bitcoin’s relationship with gold and equities has weakened in recent months. Historically viewed as “digital gold,” bitcoin has failed to follow gold’s rally in 2025. Gold rose 65% this year on central bank demand, while bitcoin fell 6.5%.

This divergence undermines the asset’s safe-haven narrative and creates uncertainty in broader portfolios. Correlation between bitcoin and equities has also dropped to the mid-teens. This is far below earlier macro-driven selloffs when bitcoin often tracked tech stocks closely.

The breakdown in correlation leaves Bitcoin more isolated in a market that is otherwise stabilizing. Equities have rebounded and gold has attracted safety-driven capital, but bitcoin has failed to follow suit. Deutsche Bank analysts described this as a signal of weakening demand and declining investor confidence.

Regulatory momentum stalls as volatility rises

Regulatory clarity had previously supported bitcoin’s rally and stabilized market expectations. However, Deutsche Bank said that progress on the Digital Asset Market CLARITY Act has paused in Congress. Disagreements over stablecoin rules have delayed further movement, reducing regulatory momentum.

This delay has impacted liquidity and confidence, allowing volatility to resurface. Analysts reported that price swings have intensified since October, matching levels before the ETF-driven rally. Regulatory uncertainty now adds to selling pressure as institutional investors hesitate.

U.S. consumer crypto adoption also declined, based on Deutsche Bank’s latest surveys. Participation fell to 12% in early 2026, down from 17% in mid-2025. The drop suggests waning interest outside of financial institutions as well.

Citi analysts added in a separate report that bitcoin now trades near its pre-election floor. They noted the price has fallen below key ETF cost bases, with inflows to these funds slowing. As headwinds build, the cryptocurrency approaches earlier support levels.

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