Bitcoin’s reputation has historically been built on extreme boom and bust cycles, with steep declines of up to 90% following all-time highs.
This cycle, however, the decline has been closer to 50%, a change that analysts say reflects the maturation of BTC as an asset class.
“Bitcoin’s declines compressing to around 50% are a sign of a maturing market structure,” Jason Fernandes, co-founder and market analyst at AdLunam, told CoinDesk.
“As liquidity deepens and institutional participation increases, volatility naturally compresses both up and down,” he added, saying that “at this point the narrative shifts from questioning its legitimacy to optimizing allocation.”
Fernandes’ comments are a response to Fidelity Digital Assets analyst Zack Wainwright’s post X on Tuesday, in which he noted that growth is becoming “less impulsive,” with a reduced likelihood of extreme bearish events as bitcoin matures.
“Less dramatic”
Wainwright pointed out that the current drop from the October 6 all-time high of just over $126,200 is much less significant than previous pullbacks.
“Each cycle has been less dramatic on the upside than the last and the downside risk has also been less dramatic,” he said.
Fernandes and Wainwright, of course, were referring to previous “recession” periods, notably after the peaks of 2013 and 2017.
After reaching a peak of around $1,163 in late 2013, bitcoin entered a prolonged “crypto winter” that saw its price drop to around $152 in January 2015, representing a decline of around 87%. A similar trend was seen after the 2017 surge, when it hit $20,000 in December before falling about 84% to $3,122 over the next 12 months.
Not all analysts agree that deeper declines are off the table.
Bloomberg Intelligence’s Mike McGlone told CoinDesk he believes bitcoin could still see a “normal return” toward $10,000, arguing that “the crypto bubble is over” and any slowdown could coincide with broader declines in stocks, commodities and other risk assets.
However, Fernandes, who previously disagreed with McGlone’s $10,000 prediction, said the scale itself was part of the story. As bitcoin becomes a broader asset class, the probability of a 90% collapse decreases simply because the capital required to drive such moves is too great. This effect is reinforced by institutional integration, from ETFs to pension exposure, which makes large-scale unwinding structurally more difficult.
Improves portfolio “efficiency”
This change is already evident in portfolio construction.
“Portfolio data is really what changes institutional behavior,” Fernandes said. “If a small allocation of 1-3% can materially improve returns and Sharpe ratios without significantly increasing drawdowns, then bitcoin begins to function less as a standalone bet and more as an efficiency-enhancing tool within a diversified portfolio.”
This framing modifies the calculation of risk. “The risk is no longer owning bitcoin,” Fernandes said. “That’s the opportunity cost of not having any visibility at all.”
Recent research from Fidelity supports this transition. In a 10-year comparison between major asset classes, bitcoin generated returns of around 20,000%, significantly outperforming stocks, gold and bonds, while also leading on risk-adjusted measures despite its volatility.
“Bitcoin remains a relatively young asset, but it has quickly become a major asset class and has been the best-performing asset in 11 of the last 15 years,” the report notes.
At the same time, the trade-off becomes clearer.
“There is a trade-off here that needs to be explained,” Fernandes said. “As Bitcoin matures and volatility reduces, you should also expect returns to normalize. The asymmetric rises of the early cycles were accompanied by extreme declines, but as those declines diminish, the asset behaves more and more like a macro allocation rather than a venture capital-style bet.”
This brings us back to withdrawals.
If bitcoin doesn’t fall more than 80% and portfolios can benefit from small allocations without significantly increasing risk, then the asset evolves into something more investable and usable, Fernandes said, concluding that for institutions this could be the real inflection point.
