Bitcoin’s sharp decline – nearly 50% from its all-time highs reached just months ago – has reignited debate over the cryptocurrency’s stability, but hedge fund veteran Gary Bode says the sell-off is a feature of the asset’s inherent volatility rather than a sign of a broader crisis.
In an article on X, Bode noted that while the recent price drop is “unpleasant and shocking,” it is not unusual in Bitcoin history. “Withdrawals of 80 to 90 percent are common,” he said. “Those who agreed to endure the ever-temporary volatility were well rewarded with incredible long-term returns. »
Much of the recent turmoil, he said, can be attributed to market reactions to the nomination of Kevin Warsh to succeed Jerome Powell as chairman of the Federal Reserve. Investors interpreted the move as a signal that the Fed may take a hawkish stance, raising interest rates and making zero-yielding assets such as bitcoin, gold and silver relatively less attractive. Margin calls on leveraged positions amplified the decline, causing a cascade of forced selling.
Bode, however, disputes the market’s interpretation. He pointed to Warsh’s public statements in favor of lowering rates and notes from President Trump suggesting that Warsh had promised lower federal funds rates. Combined with Congress’s persistent multitrillion-dollar deficits, Bode argued, the Fed has limited ability to influence long-term Treasury yields — a key factor in corporate borrowing and mortgage rates. “I think the market got it wrong,” he said, emphasizing that perception, rather than fundamentals, has driven much of the recent selling.
Other frequently cited explanations, he added, also fail to tell the whole story. One theory is that “whales” – early Bitcoin holders who mined or bought coins when prices were near zero – are offloading their holdings. While Bode acknowledges that large portfolios have been active and big sellers have emerged, he views these moves as profit-taking rather than an indication of long-term weakness. “The technical skills of early adopters and miners are to be applauded,” he said. “This does not mean that their sales (total or partial) tell us much about the future of Bitcoin.”
Bode also flagged the ($MSTR) strategy as a potential source of near-term pressure. The company’s shares fell after bitcoin fell below the prices at which Strategy purchased many of its holdings, raising concerns that Saylor might sell. Bode described this risk as real but limited, comparing it to when Warren Buffett buys a large stake in a company: investors like the support but worry about possible sales. He emphasized that bitcoin itself would survive such events, although prices could fall temporarily.
Another factor is the rise of “paper” bitcoin – financial instruments such as exchange-traded funds (ETFs) and derivatives that track the price of the crypto asset without requiring ownership of the underlying coins. While these instruments increase the effective supply available for trading, they do not change Bitcoin’s hard cap of 21 million coins, which Bode says remains a crucial anchor for long-term value. He drew parallels to the silver market, where increased paper trading initially pushes prices down until physical demand pushes them higher.
Some analysts have suggested that rising energy prices could hurt bitcoin mining and reduce the network’s hash rate, which could lower prices in the long term. Bode calls this theory exaggerated.
Historical data shows that past Bitcoin price declines have not consistently resulted in hash rate declines, and when declines have occurred, they have lagged months behind the price decline.
He also highlighted emerging energy technologies – including small modular nuclear reactors and solar-powered AI data centers – that could provide low-cost energy for mining in the future.
Bode also responded to criticism that Bitcoin is not a “store of value.” While some argue that its volatility disqualifies it from this role, Bode points out that almost all assets carry risk, including fiat currencies backed by heavily indebted governments. “[…] Gold needs energy to be secure, unless you’re comfortable leaving it on your porch,” he said. “Paper Bitcoin may influence the price in the short term, but in the long term, 21 million coins will be issued and if you want to own Bitcoin, that’s the real asset. Bitcoin is permissionless and requires no trust in a counterparty.
Ultimately, Bode’s assessment sees the recent decline as a natural consequence of Bitcoin’s design. Volatility is part of the game and those willing to endure it may ultimately be rewarded. The key takeaway for investors is that price swings, no matter how dramatic, are not necessarily a sign of systemic risk.
