Bitcoin, XRP, and Ethereum Are Falling. Here Are the 3 Main Headwinds Facing the Crypto Sector.

Key Points

• Fed rate cut wasn't enough to sustain cryptocurrency prices.

• This week saw $1.6 billion in crypto liquidations and over $360 million in outflows from spot Bitcoin ETFs.

• Caution is replacing exuberance, but there may be some positive drivers in the pipeline.

• 10 stocks we like better than Bitcoin ›

The cryptocurrency market has had an extraordinary year, with top cryptos like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) setting new all-time highs. That upward trend has stalled recently. As I write this (September 25), Bitcoin has fallen 5% in the last week, Ethereum is down 13% and XRP (CRYPTO: XRP) has shed over 9% over the same time period.

What's behind this lackluster performance? And will so-called Uptober -- a term based on data that shows prices often go up in October -- turn the crypto tides? Let's dive in to learn more about three headwinds facing cryptocurrencies right now.

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1. Money is flowing out of crypto ETFs

Crypto often suffers from a 'buy the rumor, sell the news' syndrome. Speculation drives prices up in anticipation of a big event, and then they fall because investors sell once it actually happens. In the run-up to the Fed rate cut on September 17, crypto prices rallied, and spot Bitcoin ETFs saw solid inflows.

But as investors digested Federal Reserve Chair Jerome Powell's words, they became more cautious. Particularly after a speech this week where Powell spoke of a "challenging situation" in trying to manage employment risks against inflation pressures. Lower rates often make riskier assets more attractive, but not if the benefits are offset by other economic concerns.

Sentiment is important in crypto, and right now, the fear and greed index is firmly in fear territory. That's reflected in steep outflows from spot crypto ETFs. Per the Block data, there were over $360 million in outflows from spot Bitcoin ETFs on September 22. Fidelity Wise Origin Bitcoin Fund (NYSEMKT: FBTC) alone reported $277 million in outflows. That's one of the biggest single-day outflows we've seen this year.

2. Over $1.6 billion liquidated in one day

CoinGlass data shows over $1.6 billion was liquidated on September 21 -- the largest amount so far in 2025. Over $500 million in Ethereum positions and around $300 million in Bitcoin positions were wiped out. The liquidation highlights how leveraged positions can quickly cascade as falling prices trigger liquidations and push prices even lower.

The use of margin and leverage in cryptocurrencies can amplify price volatility. And leverage levels in crypto are increasing. Investors can use their crypto as collateral and essentially borrow money to take a bigger position. If the market moves in their favor, it can translate into higher returns. However, if prices go the other way and there isn't enough collateral to back up the loan, the broker may liquidate and forcibly close the position.

3. Crypto treasury companies are faltering

This year has seen a surge in companies adding cryptocurrencies -- predominantly Bitcoin and Ethereum -- to their balance sheets. Public companies now own about 5% of the total Bitcoin in circulation, per data from BitcoinTreasuries. Their steady accumulation is one of the drivers behind Bitcoin's incredible price rally.

Pioneered by Strategy (NASDAQ: MSTR), around 200 companies now hold crypto. Many of them have raised money with the sole purpose of buying more. It can act as a hedge against inflation, and any gains from price appreciation will help their bottom line. However, if Bitcoin's price falls, so will the value of those holdings. There's a risk that companies may have to sell their crypto to cover their debt.

Currently, the corporate treasury model is under scrutiny. Companies are buying fewer Bitcoins. And a quarter of Bitcoin treasury companies now have a market cap that's lower than their crypto holdings, per K33. Some are borrowing money to finance share buybacks, raising questions about the model's long-term viability.

Image source: Getty Images.

Further volatility ahead

There's been a lot of talk in the cryptocurrency news about the potential for sentiment to shift in Uptober. That's because data shows that Bitcoin prices often fall in September and rise in October.

But the factors that are dragging crypto prices down won't change just because we're in a different month. Pay attention to jobs and inflation data. Not only will those figures influence Fed decisions about further rate cuts, but they also give us a better idea of whether the economy is slowing.

For all the headwinds, Bitcoin is holding its head above $111,000, and we may see some positive drivers before the end of the year. More rate cuts are likely, as well as SEC approval of a flurry of crypto ETFs. Plus, the government may make further progress with crypto legislation.

Whether or not the bulls can regain momentum, the recent price swings are a reminder of Bitcoin's volatility. This remains a risky and unpredictable asset, making it important to limit your crypto exposure to only a small percentage of your wider portfolio.

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Emma Newbery has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.