Why Crypto’s Slide Is Rattling Wall Street

Bitcoin and other digital tokens have lost over $1 trillion in value in recent weeks, stirring serious concerns on Wall Street about broader market fallout and systemic risk.

The cryptocurrency market is coming off a brutal and volatile week. Bitcoin dropped below $81,000 on Friday, and according to Deutsche Bank, more than $1 trillion in market value has vanished since the October peak. The uncertainty has investors worried that the sell-off is not over yet.

Veteran crypto holders recall the “crypto winter” of 2021–2022 and the FTX collapse, yet the stakes are now far higher: the global market is around $3 trillion, and the U.S. Securities and Exchange Commission last year approved spot Bitcoin exchange-traded funds, helping crypto go mainstream. The Trump administration’s support for digital tokens accelerated mainstream adoption.

Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management , told DealBook, “This is no longer a hobbyist asset class.” Asset management giants like BlackRock and Fidelity have deepened Wall Street’s exposure. Even institutions such as Harvard and the Czech central bank have added to their digital token holdings.

Mainstream adoption means larger risks for traditional markets. Now that crypto is tied to ETFs and exposed to investor leverage, a rapid market rout could disproportionately impact Wall Street portfolios, particularly those of institutional giants. The exposure could spill into other asset classes if forced sales of crypto assets trigger margin calls or risk-off sentiment.

Broader Ripple Effects and Strict Scrutiny

The drop in crypto is also worsening risk aversion across technology stocks, as investors seek safety in the face of high volatility. The growing ties between crypto and Wall Street mean that swings are being watched carefully by regulators and investors alike.

Despite the turbulence, long-time crypto advocates believe that current volatility and downturns will eventually give way to new highs, noting that the underlying fundamentals — like blockchain adoption and institutional buy-in — now run deeper than in prior cycles.

Source: The New York Times