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Bitcoin’s recent price decline has sparked wide speculation across the crypto market, with many traders searching for macro-driven explanations for the sudden downturn. Some pointed to the United States government shutdown, while others blamed fears surrounding a potential bubble in artificial intelligence (AI) technology. However, several well-known analysts argue that these theories miss the real reason behind the drop.
Market Blames US Shutdown and AI Bubble — Analysts Disagree
Bitcoin recently fell to its lowest level in nearly eight months, slipping from its October all-time high of $125,100 to its current trading range. The move triggered concerns that macroeconomic pressures were weighing heavily on crypto markets.
A popular explanation circulating online has been the U.S. government shutdown, which ended last week. Many believed uncertainty around federal operations and economic policy could have scared investors and pushed them out of risk assets, including Bitcoin.
Another narrative pointed toward fear of an AI-driven tech bubble. Some investors worry that the market’s dependence on a small group of AI-focused tech giants—especially firms like Nvidia—could create spillover effects into crypto. Victoria Scholar, head of investment at Interactive Investor, recently said that concerns over an AI bubble may have caused traders to reduce exposure to speculative assets like Bitcoin.
But several analysts say these explanations are inaccurate.
“Too Much Leverage” Is the Real Reason, Says Onchain Analyst
In a recent podcast interview, onchain analyst Rational Root pushed back strongly on the idea that the U.S. shutdown had anything to do with Bitcoin’s price correction.
“I wouldn’t contribute the drawdown in Bitcoin all to the shutdown of the government,” he said.
Instead, he pointed to a simpler—and more familiar—reason: excessive futures leverage. According to Root, Bitcoin’s drop was triggered by overly aggressive leveraged positions that built up during the market’s run to new highs. When prices started to soften, these leveraged positions were forced to unwind, creating a cascade of liquidations.
This type of leverage-driven reset has happened multiple times in the current three-year bull cycle. And each time, Bitcoin has eventually recovered and moved higher.
AI Bubble Fears Don’t Add Up Either
Analyst PlanB also dismissed the argument that AI concerns are weighing down Bitcoin’s price. He pointed out that Nvidia’s latest earnings report, released Wednesday, beat expectations significantly. Nvidia posted record revenue of $57 billion for the quarter ending October 26—far surpassing Wall Street’s $54.7 billion forecast.
With AI companies outperforming rather than struggling, PlanB argued that fears of an AI bubble spilling into crypto make little sense. “We can remove the AI Bubble thesis from the list of reasons Bitcoin is down,” he said.
What Reasons Are Left for Bitcoin’s Price Slump?
With leverage resets being the most convincing explanation, only a few other theories remain. One is the “four-year cycle” narrative tied to Bitcoin’s halving patterns. Historically, Bitcoin tends to follow predictable price surges and corrections roughly every four years.
However, some analysts believe those patterns may be breaking down. Swan Bitcoin CEO Cory Klippsten recently noted that institutional adoption—especially through ETFs, corporate holdings, and structured products—may be weakening Bitcoin’s traditional cycle behavior.
The other remaining explanation is global liquidity. Investors tracking macro liquidity often refer to the M2 money supply. When liquidity contracts, risk assets usually face downward pressure. As Strike CEO Jack Mallers put it: “Bitcoin is the most sensitive to liquidity. It moves first. It’s a truth machine.”
Why the Reset Could Be Good for Bitcoin
Despite short-term pain, Rational Root believes Bitcoin’s recent drawdown may be healthy. The price correction has wiped out abnormal leverage and brought the market back to more sustainable levels.
Root said Bitcoin has experienced three major resets in the past three years—each one similar to conditions typically seen in bear markets. Yet each reset has eventually “allowed us to move higher.”
With excessive leverage flushed out, Root believes Bitcoin now has a “clean slate” and room to grow more gradually without the risk of sudden forced liquidations.
Could Bitcoin Benefit From Upcoming ETF Decisions?
Some market commentators also suggest that the U.S. government’s return to normal operations following the shutdown may accelerate regulatory decisions, especially around crypto ETFs. The Securities and Exchange Commission is expected to handle a new wave of ETF applications in 2026, which could influence Bitcoin’s long-term trajectory.
For now, analysts agree that the recent plunge is far more about internal market dynamics than external macro forces. With leverage removed and liquidity conditions stabilizing, Bitcoin may be better positioned for a steadier recovery.
