No, but seriously: What’s going on with bitcoin?
Bitcoin has tumbled 44% from its peak last fall.
New York (CNN) — Bitcoin is acting weird.
The world’s most famous cryptocurrency has tumbled 44% from its October peak, falling below $70,000 Thursday for the first time in 15 months.
That decline is actually not unusual at all. Crypto is notoriously volatile, and it’s gone through numerous crashes that are bigger than this one.
What’s strange is this: Bitcoin’s four-month slump has come at a time when, in theory, it had everything going for it.
Crypto bulls have long advocated that investors treat bitcoin as “digital gold,” a new safe haven investment where traders can store funds when times are tough.
So now would be a logical time for a safe haven to surge.
Geopolitics have gotten spicy this year: President Donald Trump is threatening to attack Iran after the United States removed the leader of Venezuela. The US president has recently been going after allies in Europe and Canada over Greenland, and he’s threatening higher tariffs on South Korea.
Meanwhile, significant AI advances are giving stock market investors the heebie jeebies. Anthropic’s Claude can now perform tasks for law firms, sending software shares plunging.
Fear gauges are flashing warning signs. CNN’s Fear and Greed Index is solidly in “fear” mode, and the VIX volatility index was briefly at its highest point since November, when the market had a mini-meltdown over confusing post-shutdown economic data and Nvidia earnings. (It was a simpler time.)
That fear has powered a record rally in gold prices, which recently blew past $5,500 a troy ounce. Gold is the ultimate safe haven: a relatively rare and tangible asset that stores value – and is able to be literally hidden under a mattress if worse came to worst.
But bitcoin isn’t coming along. It’s lost 20% this year despite all the uncertainty. In fact, Michael Burry, (the “Big Short” guy), recently wrote on his Substack that he believes gold and silver’s extreme volatility in recent days is because bitcoin bulls are selling off their metal positions to save face from crypto’s slide.
Bitcoin’s bust means it lost its entire “Trump bump.” Crypto investors cheered Trump’s victory in November 2024, sending bitcoin and other cryptocurrencies surging, after Trump embraced the digital assets he once shunned, and instead pledged to remove regulations that he said were holding crypto back.
So what’s behind this new crypto winter? Mostly doubts that bitcoin is “digital gold,” after all.
Bitcoin has been swept up in all the “risk-off” sentiment flowing through the market. Rather than giving investors reason to buy, traders are seeing that fear as a reason to sell. The continued divergence between gold (up 24% since October) and bitcoin (down 44%) has only solidified that sentiment.
Treasury Secretary Scott Bessent didn’t help matters Wednesday, when he testified before the House Financial Services Committee that the Treasury has no authority to stabilize crypto markets.
Bitcoin ETFs also haven’t taken off quite the way that crypto bulls had expected, and institutional investment in bitcoin has declined in recent months, reducing trade volumes. That has exacerbated knee-jerk reactions from everyday traders.
But there may be light at the end of the crypto tunnel for bitcoin investors. This crash is not a new trend – we’ve been here before.
In 2014, crypto prices imploded after crypto exchange Mt. Gox was hacked. The largest bust happened in 2018, when bitcoin tumbled 74%, fueled by fear that the explosion of initial coin offerings was overdone. And crypto had back-to-back crashes in 2021 and 2022, after regulatory pressure and the FTX scandal shattered confidence.
Each time, bitcoin has bounced all the way back within a year and a half.
The-CNN-Wire
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