Bitcoin has fallen by close to about 30% from this year's peak, decisively lagging the returns of major assets such as Government Bonds, tech stocks, and gold. Analyses are emerging in the market that bitcoin has effectively failed in all three roles it was once lauded for: a high-growth investment destination, an inflation hedge, and a portfolio diversification asset.
According to Bloomberg on the 19th (local time), even as interest rates fell and risk appetite cooled at the same time, bitcoin remained weaker than gold, a traditional safe haven, and posted results that fell short of most major assets, including the Nasdaq, long-term bonds, and emerging market indexes.
In the industry, the moment when bitcoin briefly fell below $90,000 is cited as symbolic. That level is almost the same as the average purchase price of funds that flowed in after the launch of exchange-traded funds (ETFs), meaning the average bitcoin ETF investor moved into a loss. In fact, after the plunge on the 10th of last month, investors' risk aversion surged, sharply increasing demand to defend the $80,000–$85,000 range, and the options market puts the probability that bitcoin will surpass its all-time high of $126,000 again by year-end at under 5%.
Experts pointed to two main reasons for bitcoin's slump. The first is the psychological shock left by last month's crash. About $19.0 billion (about 2.77 trillion won) in leveraged positions evaporated, prompting both market makers and investors to scale back liquidity provision, while fear of volatility took deep root.
The second is macroeconomic pressure. With weak growth indicators in Asia, a sluggish Chinese stock market, and a pullback in tech shares ahead of Nvidia's earnings release shaking risk assets broadly, bitcoin moved more like a risk asset that swings more sharply with market moves. In other words, bitcoin has no longer been an independent hedge asset, but has turned into an asset that is most shaken by economic and liquidity shocks.
U.S. bitcoin ETFs are also seeing outflows. Until the first half, there were high expectations that institutional inflows would keep prices rising, but as prices fell again near the peak, investors quickly shifted to a defensive stance. Contrary to early projections in the market that "ETFs will enhance bitcoin's stability," some also noted that ETF structures have acted to amplify price volatility.
Even so, bitcoin still remains above its price before Trump's reelection. Looking only at long-term performance, there are still stretches where bitcoin outperforms major asset classes. However, for this year alone, it has become more likely to end with the narratives of "digital gold," an inflation hedge, and an independent asset for portfolio diversification all shaken.
The path of bitcoin from here is likely to be more than simple price moves; it will serve as a barometer for what role cryptocurrencies can play in financial markets. Experts said "$90,000 will be a key short-term inflection point." If this price band holds, market sentiment could rebound, but if it breaks, the odds of further declines increase.