Crypto market enters the second half of the year in decline: why Bitcoin continues to lose value

At the beginning of the year, many analysts expected 2026 to extend the bullish cycle* that began after the launch of spot exchange-traded funds (ETFs) and the surge in institutional interest in digital assets. Reality, however, turned out to be very different. Instead of reaching new highs, the cryptocurrency market ended the first half of the year with one of its sharpest declines in recent years.

Over the past six months, the industry's total market capitalization has declined by approximately $1 trillion. Bitcoin has lost about one-third of its value, Ethereum has fallen by nearly half, and the Crypto Fear & Greed Index has remained in the Extreme Fear zone for several consecutive weeks. This has occurred amid weakening institutional demand, prolonged regulatory uncertainty, and growing doubts about the market's near-term outlook.

The first half of the year has been one of the weakest periods for Bitcoin in recent years. Since January, the world's largest cryptocurrency has declined by approximately 34%, briefly falling to $57.7 thousand on July 1—its lowest level since September 2024. The price later partially recovered to around $58.6 thousand, but this still represents a decline of roughly 53% from its all-time high of $126 thousand, reached in October last year.

Despite the correction, Bitcoin remains the dominant asset in the cryptocurrency market. Its market capitalization is estimated at approximately $1.17 trillion, accounting for more than 58% of the total digital asset market.

The first half of the year was equally challenging for Ethereum. The second-largest cryptocurrency by market capitalization has lost approximately 47% of its value and is currently trading near $1.57. This is almost 68% below its all-time high, reached in August last year.

The downturn has not been limited to the largest cryptocurrencies. The total cryptocurrency market capitalization has declined from approximately $3 trillion to $2 trillion. This trend indicates that investors are reducing their exposure across virtually the entire digital asset market in favor of more conservative financial instruments. The issue is no longer confined to individual projects—it reflects a broader shift in risk appetite.

Despite the prolonged correction, the cryptocurrency market continues to produce projects that can outpace the broader trend. Such success stories traditionally emerge even during the most difficult market cycles, as investor attention shifts toward specific technologies or sustainable business models.

Among the top 100 cryptocurrencies by market capitalization, the strongest performance came from the digital asset Velvet (VELVET), whose price has increased by approximately 1,000% since the beginning of the year. Another standout performer was Hyperliquid (HYPE), which has gained around 153%.

At the same time, the downside of high volatility has been equally evident. Several projects have significantly underperformed the broader market. Aptos (APT), for example, has fallen by approximately 65%, while the meme coin Official Trump (TRUMP) has lost nearly 64% of its value, making it one of the biggest underperformers of the first half of the year.

This growing divergence suggests that investors have become far more selective. During previous rallies, capital flowed across almost the entire industry. Today, however, investment is concentrated in projects that offer either a clear economic model or a strong technological foundation.

Market sentiment is clearly reflected in the Crypto Fear & Greed Index*. On July 1, the index stood at just 11 out of 100, placing it firmly in the Extreme Fear zone, where it has remained for almost the entire month of June.

For comparison, the index reached 61 in mid-January, reflecting strong investor optimism. Sentiment deteriorated rapidly afterward. One contributing factor was the escalation of tensions between the United States and Iran, which increased uncertainty across global financial markets. The index briefly returned to neutral territory in May, but the recovery proved short-lived.

Today, market psychology is driving investor behavior more than anything else. As long as investors fail to identify convincing catalysts for renewed growth, demand for digital assets is likely to remain weak, and any further deterioration in the news cycle will continue to put additional pressure on prices.

Just a year ago, the launch of spot Bitcoin ETFs* was widely regarded as the beginning of a new era for the cryptocurrency market. Today, however, this segment has become one of the clearest indicators of cooling institutional interest.

In June, U.S. spot Bitcoin ETFs recorded a record monthly net outflow of $4.51 billion—the worst performance since these funds were introduced in early 2024. Since January, cumulative net outflows from Bitcoin ETFs have reached approximately $5.45 billion.

Ethereum has experienced a similar trend. Spot Ethereum ETFs ended June with net outflows totaling $529 million, bringing cumulative outflows since the beginning of the year to approximately $1.48 billion.

Until recently, ETFs were widely viewed as the primary bridge between traditional finance and the cryptocurrency industry. They were expected to generate a steady flow of institutional capital while reducing the market's dependence on retail investors. Instead, the opposite has occurred: the very funds that were expected to support demand have become an additional source of selling pressure.

Expectations surrounding regulatory progress have also failed to materialize. Many market participants anticipated that the world's largest economies would introduce comprehensive regulatory frameworks for cryptocurrencies by the middle of the year. Instead, most legislative initiatives have been postponed.

The European Union remains the only major exception. On July 1, the Markets in Crypto-Assets Regulation (MiCA) entered into full force, establishing a unified regulatory framework for crypto-assets across the EU.

In Russia, the adoption of legislation governing digital currency and digital rights has been postponed until September. Meanwhile, in the United States, the CLARITY Act (Digital Asset Market Clarity Act)—which aims to define the responsibilities of key financial regulators and establish a unified regulatory framework for digital assets—has yet to receive final approval.

For the market, this uncertainty encourages investors to remain cautious. Many prefer not to increase their exposure to cryptocurrencies until the regulatory environment becomes more predictable.

Additional pressure on investor expectations has come from developments in the United States.

According to data from the Polymarket platform, the probability of the CLARITY Act being passed before the end of the year has fallen to a record low of 39%. One contributing factor was reports claiming that U.S. President Donald Trump had earned more than $1 billion from cryptocurrency-related ventures.

These reports have reignited concerns within the U.S. political community about potential conflicts of interest. Critics argue that the administration is simultaneously promoting cryptocurrency regulation while the President and affiliated entities remain major participants in the digital asset industry.

Even if the bill is eventually approved, these political debates could significantly slow its progress through Congress. For investors, this means continued uncertainty—one of the key factors currently preventing a recovery in the cryptocurrency market.

Until recently, Strategy was widely regarded as the ultimate symbol of unwavering confidence in Bitcoin. For years, the company consistently expanded its Bitcoin holdings, becoming the largest corporate owner of the world's leading cryptocurrency.

The prolonged market decline has changed that perception.

According to available estimates, the company's unrealized losses have reached approximately $13 billion. Against this backdrop, Strategy has decided to sell part of its Bitcoin reserves in order to meet its obligations to investors and service its debt.

The planned sale is estimated at approximately $1.25 billion. Although this represents only a small portion of the company's holdings, the psychological impact has proven more significant than the transaction itself.

For years, the market viewed Strategy as an investor who accumulated Bitcoin regardless of market conditions and would never consider selling. That perception is no longer absolute, further increasing nervousness among market participants.

The current correction may appear painful, but periods like this have often marked crucial stages in the development of the cryptocurrency industry.

During rapid bull markets, capital tends to flow into almost any project, regardless of technological quality or business sustainability. Bear markets* operate differently—they force investors to pay closer attention to fundamentals while requiring projects to demonstrate genuine value.

For this reason, the current downturn can be viewed not merely as another market decline, but as a process of natural selection. Companies with sustainable products, transparent business models, and clearly defined strategies have an opportunity to strengthen their positions, while weaker projects gradually disappear from the market.

Ultimately, the defining outcome of the first half of 2026 may not be Bitcoin's decline or the contraction of the industry's market capitalization. More importantly, the cryptocurrency market is gradually moving beyond expectations of perpetual price appreciation. Increasingly, it is being evaluated through the lens of trust, infrastructure maturity, and the practical utility of digital assets. These factors are likely to shape the next phase of the industry's development.