headwinds

The cryptocurrency market has had an extraordinary year, with top cryptos like Bitcoin (BTC -4.23%) and Ethereum (ETH -8.20%) 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 (XRP -6.93%) 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.

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 (FBTC -4.10%) 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 (MSTR -8.78%), 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.

SACRAMENTO — With diversity programs under full assault by the Trump administration, California lawmakers are considering a measure that would allow state colleges to consider whether applicants are descendants of African Americans who were enslaved in the United States.

The bill, which would probably face a legal challenge if passed, is part of a package of 15 reparations bills supported by the California Legislative Black Caucus being considered in the current legislative session.

Assembly Bill 7, introduced by Assemblymember Isaac G. Bryan (D-Los Angeles), if passed, could potentially skirt around the state’s ban on affirmative action. California voters in 1996 approved a state ballot measure, Proposition 209, that bars colleges from considering race, sex, ethnicity, color or national origin in admissions under Proposition 209. The U.S. Supreme Court in 2023 also ruled those programs were unconstitutional.

Bryan, however, says his has nothing to do with race and doesn’t use the terms “Black” or “African American” in its text.

“Descendants of people who are enslaved could identify in a variety of racial ways, and then phenotypically even present in different ways than they racially identify,” he said in an interview with The Times. “But if your ancestors were enslaved in this country, then there’s a direct lineage-based tie to harms that were inflicted during enslavement and in the after lives thereafter.”

The bill, and others in the reparations package, had seen widespread support within the Legislature’s Democratic supermajority and are representative of California’s values, Bryan said.

“I think California is quite clear where it positions itself in this moment, and that is in the support of all people, recognizing the harms of the past and trying to build a future that includes everybody. And if that appears in conflict with the federal government, I think that has more to do with the way the government is posturing than who we are as Californians,” he said.

Last year, when only 10 of 14 bills in the reparations package passed through the Legislature, reform advocates felt the efforts were lackluster. Lawmakers believed it was a foundation they could build upon, Assemblymember Lori D. Wilson (D-Suisun City) said in September.

AB 7’s focus on lineage, said Taifha Alexander, a professor at UCLA and expert in critical race theory, could face legal trouble if a judge believed it used lineage as a proxy for race. It could be ruled unconstitutionally discriminatory under the 14th Amendment.

A separate reparations bill, however, could help offer a legal definition to separate race from lineage. Senate Bill 518 would create a state bureau for descendants of American slavery. The state agency would verify a person’s status as a descendant and help applicants access benefits.

Comprehensive reparation legislation isn’t a novel idea and has been enacted before, Alexander said. In the Civil Liberties Act of 1988, the federal government formally apologized to Japanese Americans for their illegal incarceration in detention camps during World War II, and included a one-time payment of $20,000 to survivors.

Reparations — in the form of cash payments — fell flat with voters when last polled by the UC Berkeley Institute of Governmental Studies and co-sponsored by The Times in 2023. More than 4 in 10 California voters “strongly” opposed cash payments and 59% opposed the idea, with 28% in support. None of the bills currently before the Legislature includes cash reparations.

Other forms of reparations, such as a change to the college admissions process and social programs, are still valid ways to address inequities, Alexander said.

But a bill like AB 7, which looks to circumvent existing law, could face headwinds from the public who could see it as unfair, she said.

With the outcome of the 2023 Supreme Court case which banned college admissions processes from using race, she said the policy was unlikely to be popular.

Opponents argue the bill’s distinction between race and ancestry is not enough to survive judicial review, and believe a court will find lineage to be a proxy for race to circumvent the ban.

“Suppose, instead, that a state passed a law making university admission more difficult for descendants of American slavery. Would anyone argue that such a law should be upheld? Of course not,” Edward Blum, president of Students for Fair Admissions and the lawyer who argued and won the case to ban affirmative action, said in a statement to The Times.

“It would be struck down immediately as unconstitutional racial discrimination. That hypothetical reveals the core defect of AB 7 — it makes a race-linked classification under the guise of ancestry and will not withstand judicial review. If enacted, this legislation will face a swift and vigorous legal challenge in federal court and be struck down. It takes Herculean stupidity to believe otherwise,” Blum wrote.

Other bills still working through the legislative process include measures that would set aside home purchase assistance funds for descendants of American slavery that are buying their first homes and direct state agencies to address mortgage lending discrimination.

The reparations legislation that has failed to advance includes a proposed state constitutional amendment that would have banned prisons from requiring inmates to work, which some consider state-sanctioned slavery or indentured servitude.