Bitcoin’s 50% Drawdown: How the US Budget War Hit Crypto Liquidity
Between October 2025 and February 2026, Bitcoin fell from record highs above $125,000 to nearly $60,000, erasing around half its value and wiping out roughly $1.9 trillion from the wider crypto market cap. Far from being a purely “crypto-native” blow‑up, this crash was triggered and amplified by a brewing U.S. budget crisis, higher real yields, and shrinking liquidity as the government soaked up capital to fund record deficits. This article explains how Treasury issuance, ETF flows, and shifting macro narratives combined to crush digital assets—and what that link between fiscal stress and Bitcoin means for the next phase of the cycle.
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