A half-year of disappointment: what is happening to the crypto market?

Crypto market in the red: Bitcoin and Ethereum lose ground

Bitcoin (BTC) finished the first half of 2026 down 34%, and at the beginning of July, the cryptocurrency fell to its lowest level in nearly two years. On the morning of July 1, Bitcoin dropped to $57,700, its lowest price since September 2024.

Throughout the day, Bitcoin traded around $58,600, approximately 53% below its all-time high of $126,000 reached in October last year. Bitcoin's market dominance currently stands at 58.23%, with a market capitalization of approximately $1.17 trillion.

Since the beginning of the year, the total cryptocurrency market capitalization has declined by roughly one-third, from $3 trillion to $2 trillion. Over the same period, Ethereum (ETH) lost 47% of its value. The largest altcoin is currently trading at around $1,570, approximately 68% below its all-time high of nearly $5,000 recorded in August last year.

The decline in cryptocurrency prices is not limited to individual assets but affects virtually the entire market. This indicates that investors are shifting toward more conservative strategies and reducing their risk appetite, rather than reacting to problems within specific crypto projects.

Winners and losers of the first half of the year

Not all digital assets followed the broader downward trend. Even in a weak market, several projects managed to deliver impressive gains. Among the top 100 cryptocurrencies by market capitalization, Velvet (VELVET) posted the strongest performance since the beginning of the year, rising by approximately 1,000%. Hyperliquid (HYPE) also ranked among the top performers, gaining 153%.

However, the market's high volatility also worked against it. Several assets from the top 100 came under significantly greater pressure than the market average. Aptos (APT) recorded one of the steepest declines, losing 65%, while the meme coin Official Trump (TRUMP) fell by 64%.

Fear replaces greed: investors turn defensive

As of July 1, the Crypto Fear & Greed Index* stood at 11 out of 100, placing the market firmly in the "Extreme Fear" zone. The indicator remained at these levels throughout June. Its highest reading this year was recorded on January 15, when it reached 61 ("Greed"), before market sentiment deteriorated sharply amid the conflict between the United States and Iran. In May, the index briefly returned to neutral territory before declining once again.

* The Crypto Fear & Greed Index is a composite market sentiment indicator that measures the prevailing emotional state of cryptocurrency market participants. It is calculated on a scale from 0 to 100, based on multiple factors, including market volatility, trading volume, market momentum, search trends, and social media activity. Readings below 25 generally indicate "Extreme Fear," suggesting elevated investor caution and increased selling pressure, while values above 75 represent "Extreme Greed," often associated with overheated market conditions.

Market sentiment continues to be driven largely by institutional investors, regulatory developments affecting digital assets, and the financial situation surrounding Strategy. However, none of these factors has yet provided meaningful support for the cryptocurrency market.

Institutional capital pulls back: spot ETFs no longer support the market

U.S. spot Bitcoin ETFs* ended June with a record net outflow of $4.51 billion, marking their worst monthly performance since launching in early 2024. Since the beginning of the year, cumulative net outflows from Bitcoin ETFs have reached $5.45 billion. Spot Ethereum ETFs also recorded negative performance, with investors withdrawing $529 million during June, bringing total year-to-date outflows to $1.48 billion.

* An ETF (Exchange-Traded Fund) is an investment fund whose shares are traded on a stock exchange. ETFs allow investors to gain exposure to a particular asset class, market index, industry, or commodity without purchasing each underlying asset individually. Within the cryptocurrency industry, ETFs may track digital assets directly or through derivative financial instruments, providing investors with access to crypto markets via traditional financial infrastructure.

Record ETF outflows indicate that institutional demand for cryptocurrency assets has weakened considerably. This is a negative signal for the market, as ETFs — once viewed as one of the primary channels for bringing institutional capital into the crypto industry — are now becoming a source of downward pressure on cryptocurrency prices.

Regulatory clarity delayed once again

Market participants had expected significant progress in cryptocurrency regulation across Russia, the United States, and the European Union by early July. In practice, however, only the European Union implemented new rules, with the Markets in Crypto-Assets (MiCA)* regulation taking effect on July 1. In Russia, adoption of the law on digital currency and digital rights has been postponed until September 1, while in the United States the CLARITY Act* has yet to receive final approval. As a result, the cryptocurrency market has not received the regulatory catalyst many investors had anticipated, contributing to continued market caution.

* The Markets in Crypto-Assets (MiCA) Regulation is the European Union's comprehensive legal framework governing crypto assets. It establishes unified rules for crypto-asset issuers, stablecoin providers, and crypto service providers throughout the EU. MiCA is widely regarded as the world's first comprehensive supranational regulatory framework covering the entire cryptocurrency market.

* The Digital Asset Market Clarity Act (CLARITY Act) is proposed U.S. legislation aimed at establishing a unified regulatory framework for digital assets while clearly defining the respective responsibilities of federal regulators. The bill outlines criteria for determining whether digital assets should be classified as securities or commodities and allocates oversight authority between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

According to data from Polymarket, the probability of the CLARITY Act being passed before the end of this year has fallen to a record low of 39%. The decline followed reports that U.S. President Donald Trump had earned more than $1 billion from cryptocurrency-related activities.

These revelations have intensified discussions about potential conflicts of interest, as the U.S. administration continues to promote digital asset regulatory reform while the President and affiliated entities remain major participants in the cryptocurrency market. According to several analysts, political and ethical concerns could complicate the bill's progress through Congress.

The Strategy factor: how one major holder is pressuring Bitcoin

Another source of pressure comes from the financial position of Strategy. According to available information, the company has accumulated approximately $13 billion in unrealized losses and subsequently decided to sell part of its Bitcoin reserves to meet debt obligations to investors.

The potential sale could amount to approximately $1.25 billion. Although this does not represent a full liquidation of the company's holdings, the mere possibility of Strategy selling Bitcoin has become a significant concern for the market, as the company has long been regarded as one of the largest and most committed corporate holders of Bitcoin.

Conclusions

Paradoxically, the current downturn may prove to be one of the most constructive phases in the evolution of the cryptocurrency market. Extended bull markets inevitably attract capital into almost any project, whereas prolonged corrections serve as a genuine test of long-term viability.

If previous market cycles were driven primarily by expectations of rapid price appreciation, the industry's next stage of development is likely to be built around trust, transparency, and the practical utility of digital assets. The market's ability to successfully undergo this transformation — not the speed of Bitcoin's price recovery — will ultimately become the clearest indicator of the cryptocurrency industry's maturity.