Bitcoin’s price has taken a beating recently. After reaching a new all-time high above $126,000 in October, the crypto asset fell below $60,000 earlier this month before recovering to trade around $67,000 today. Other cryptocurrencies have suffered even more, with President Trump’s memecoin plunging about 95% from its peak.
Several factors appear to have driven this recent price movement. The downturn gained momentum from an altcoin deleveraging episode in October that liquidated over $19 billion in leveraged positions in a short period. This was triggered partly by tariff announcements and mirrored the leverage problems that plagued the market in 2022. Worries about quantum computers potentially breaking current encryption standards have added pressure, as evidenced by Coinbase’s initiative to address the threat. Meanwhile, gold has significantly outperformed bitcoin as a debasement hedge during rising geopolitical tensions, putting the “digital gold” narrative around the crypto asset into question.
On top of these changing dynamics around the bitcoin price, crypto mining companies such as Bitdeer and Cango have ramped up their moves into artificial intelligence. Bitdeer sold off its entire bitcoin treasury, while Cango offloaded 4,451 BTC for roughly $305 million. Bitdeer has emphasized that the broader bitcoin market should not be concerned by its decision to sell its stash, noting plans to continue growing its mining operations alongside the pivot.
That said, this market weakness has done little to slow down Michael Saylor and Strategy, by far the most committed corporate bitcoin holder. The company, which now controls over 717,000 BTC worth around $47 billion, keeps adding to its position with regular purchases. Strategy maintains a steadfast long-term outlook on bitcoin’s appreciation potential, and it is precisely this extended timeframe perspective that treats bitcoin as an evolving global reserve asset that is behind the general thesis of a new report from Fidelity Digital Assets. The report highlights constructive takeaways from the current cycle’s price behavior, and also suggests the classic four-year halving cycle may be losing relevance as institutional investors participate more heavily through spot bitcoin ETFs, corporate treasuries, and other institutional vehicles.
The Fidelity team points to sharply reduced volatility as the primary positive development for bitcoin in recent years. As the report notes, “In fact, the notable stability showcased over the last year and a half may suggest that while bitcoin is not rising to dramatic new heights, it is also avoiding steep lows. In an extended environment of high profit and low volatility, bitcoin may simply grind higher over time without the extreme swings that defined earlier cycles.”
Specifically, the report compares various measurements of bitcoin price volatility over four market cycles. These volatility metrics are the market value to realized value (MVRV), Puell Multiple, and profit-to-volatility ratio. “From the 2013 cycle to today, each successive cycle has had less dramatic swings, showing the maturation of bitcoin over the years and making the current cycle appear comparatively restrained,” the report says of bitcoin’s Puell Multiple.
Furthermore, the document indicates Bitcoin could sidestep the massive 80% drawdowns characteristic of past bear markets. This could render bitcoin’s four-year boom-and-bust cycles far less impactful on the price going forward. “When assessing the data outlined above, a strong case can be made that the typical four-year cycle investors have become accustomed to may no longer apply,” it states.
Of course, detractors interpret the recent performance, particularly against gold’s gains, as proof that bitcoin’s digital gold story is finished. This view is espoused by various individuals from differing perspectives, including blockchain developers more interested in smart contract platforms than bitcoin’s monetary properties, dedicated supporters of real, physical gold, and well-known economists such as Nobel Laureate Paul Krugman. Despite their differing worldviews, they converge on the idea that bitcoin possesses no intrinsic value and is likely to eventually go to zero.
During a Bloomberg interview earlier this month, Krugman called the notion of bitcoin as superior money “a total bust, and it’s a 17-year-old bust,” amid talk of a potential crisis of faith in the crypto asset. Krugman added that, in his view, much of the positive price action seen in bitcoin over the past couple of years was attached to support from President Trump, and now that short-term political support for the price is coming to an end. Of course, it’s also worth remembering Krugman has voiced similar doubts since 2011, when bitcoin barely had a dollar-denominated exchange rate at all.
Fidelity’s assessment draws on concrete market data showing maturation, but what happens next is still uncertain. From Fidelity’s perspective, a roughly 50% price drop from the highs surprisingly stands out as encouraging for bitcoin’s path toward becoming a steadier reserve asset. On the other hand, there’s still plenty of potential for the past few months to have only been a preview of the same sort of deep, drawn-out bear market from bitcoin’s past that is still to come.
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