In the ever-turbulent realm of cryptocurrency, the past few weeks have been particularly challenging.

While investors in digital currencies are no strangers to sharp fluctuations, the staggering US$1 trillion ($1.55 trillion) loss over the last six weeks has pushed even the most steadfast enthusiasts to their limits, while deterring many newcomers.

Bitcoin, often seen as the industry’s flagship, has experienced a significant drop since its peak in early October, when it soared to an unprecedented US$126,000 ($194,895).

The leading cryptocurrency plummeted to below US$81,000 ($125,290) on Friday, though it managed to rebound slightly over the weekend.

By Monday, as traditional stock markets surged, Bitcoin climbed past US$88,000 ($136,117), marking an almost 2 percent increase within a single day. (Unlike traditional markets, cryptocurrency trading never sleeps, operating around the clock.)

It is shaping up to be one of crypto’s worst months on record, and it’s not clear the market has bottomed out.

“Whether Bitcoin stabilises after this correction remains uncertain,” Deutsche Bank analysts wrote.

“Unlike prior crashes, driven primarily by retail speculation, this year’s downturn has occurred amid substantial institutional participation, policy developments, and global macro trends.”

While crypto’s fate has broadly mirrored the stock market’s in recent years, its current angst runs deeper. That’s largely thanks to an influx of mainstream money that behaves very differently from the funds controlled by a typical crypto investor.

Bitcoin is in a bear market, having dropped 30 per cent from its most recent high, while the S&P 500 is down just 3 per cent from its most recent peak. It is on track for its worst month since the 2022 crypto “winter” that culminated in the collapse of Sam Bankman-Fried’s FTX.

Anxiety is coursing through stocks and crypto for two key reasons: Investors are fretting over the Federal Reserve’s next rate cut, and they’re worrying about whether AI is a bubble that’ll blow up in their faces.

All of that weighs on crypto traders because digital assets, like tech stocks, are especially sensitive to changes in the Fed’s benchmark rate, which affects the cost of borrowing money and can quickly sap investor appetite for risk.

But crypto investors have an additional hangover to deal with following an October 10 flash crash.

When US President Donald Trump reignited his trade war with China that day, it prompted a wave of panic-selling that triggered automatic liquidations across the highly leveraged crypto market.

In a single day, the flash crash wiped out US$19 billion ($29.4 billion) worth of crypto. For a lot of folks, the stomach-churning crash was all the motivation they needed to exit crypto completely, and that’s left bitcoin and other tokens more susceptible to volatility.

The flash crash forced many investors sell their holdings to meet margin calls. That tends to have a snowball effect: The more bitcoin falls, the more calls investors face from their brokerages, the more they have to sell their bitcoin (and other holdings) to cover their positions.

What makes this crypto crash different is the presence of billions of dollars that have entered the crypto market through spot bitcoin funds that US regulators approved last year.

Mainstream investors got into crypto to enjoy the ride up, but they don’t have the same level of devotion to the ideology as early adopters who are bolstered by intense online communities encouraging one another to buy the dip and keep the faith.

“The bottom line is, bitcoin is for normies now,” Steve Sosnick, chief strategist at Interactive Brokers, said.

“As a result, the normies are going to view it as another speculative holding in their portfolio … it’s going to be treated like a volatile mainstream investment.”