Bitcoin’s $23K Crash: Trump, Banking Fears, ETF Exodus

The collapse began with global political uncertainty emanating from the United States, where President Donald Trump threatened China with a new wave of tariffs. Bitcoin immediately corrected from over $122,000 to under $117,000 as tensions between the two superpowers escalated. The situation worsened dramatically as futures positions began liquidating in an overly leveraged market, creating a cascade effect that drove bitcoin down to $110,000 on some exchanges and as low as $101,000 on others.

What made the situation particularly volatile was the subsequent revelation that the geopolitical tension might have been exaggerated. As reports emerged suggesting a misunderstanding between the United States and China, Bitcoin’s price recovered to $116,000. However, the respite proved temporary as attention shifted to another geopolitical flashpoint – the Ukraine/Russia conflict. When Trump met with Russia’s Vladimir Putin on Thursday, BTC began losing traction, and the pressure continued when Ukrainian leader Volodymyr Zelenskyy visited the White House on Friday amid reports that Ukraine might not receive requested Tomahawk cruise missiles.

Parallel to the geopolitical concerns, the United States banking system showed signs of strain reminiscent of the 2023 Silicon Valley Bank failure. Two regional financial institutions – Zions Bancorp and Western Alliance – published concerning data that rattled investor confidence. Zions Bancorp disclosed a $50 million charge-off tied to two commercial loans in California, while Western Alliance initiated a fraud lawsuit against a borrower, raising questions about its loan portfolio quality.

The banking concerns quickly spread beyond United States borders, affecting major European financial institutions including Deutsche Bank, Barclays, and Société Générale, whose stock prices dropped significantly on Friday. Despite Bitcoin’s theoretical position as an alternative to traditional finance, such banking crises typically harm the cryptocurrency in the short term as investors seek liquidity and reduce risk exposure across all asset classes.

The reversal in spot Bitcoin ETF flows represented a dramatic shift in institutional sentiment. After an impressive 9-day period starting in late September that saw nearly $6 billion flow into these products, the trend reversed sharply at the end of the previous business week. What began as a minor net outflow of $4.5 million quickly escalated into a full-scale exodus.

The withdrawals intensified throughout the week, with $326.4 million leaving on Monday, $104.1 million on Wednesday, and a massive $530 million outflow on Thursday. Friday continued the negative trend with more than $366 million exiting the funds. The total weekly withdrawal from United States-based ETFs exceeded $1.2 billion, creating substantial selling pressure on the underlying Bitcoin asset and contributing significantly to the price decline.

While Bitcoin struggled, traditional safe-haven asset gold continued its impressive 2025 rally, charting new all-time highs almost daily and reaching nearly $4,400 per ounce on Friday. This divergence challenged the long-standing narrative among Bitcoin proponents that the cryptocurrency serves as ‘digital gold.’ The precious metal’s performance during this period of uncertainty appeared to validate critics like Peter Schiff, who have consistently argued that gold remains the preferred safe-haven asset during market turmoil.

The contrasting performances of gold and Bitcoin during this crisis period highlight the ongoing debate about Bitcoin’s role in portfolio construction. While Bitcoin had shown moments of behaving as a hedge against traditional financial system risks, its reaction to the combination of geopolitical tension, banking concerns, and ETF outflows demonstrated that it remains highly correlated with risk assets during certain market conditions.