Bitcoin suffers from an identity crisis that has nothing to do with fundamentals but rather a shortened attention span.
While gold rose more than 12% and the S&P 500 rose over the past 30 days, bitcoin slipped more than 10% in a market that appeared to present no reason to shock the largest cryptocurrency. The real story, according to Greg Cipolaro, global head of research at NYDIG, is what he calls speculative cannibalization.
In other words, the buzz of short-term speculation creates a capital deficit. The type of high-risk, instantly rewarded investing that once fueled Bitcoin rallies is now moving toward flashier alternatives like online sports betting, prediction markets and zero-day stock options that settle before sunset, Cipolaro said in NYDIG’s latest weekly Bitcoin update.
As Cipolaro points out, three long-standing trends – expanding access to speculative markets, growing demand for quick lottery-style wins, and the increasing speed of financial returns – are converging to create an environment in which slower, long-duration assets like bitcoin are at a disadvantage.
Capital does not abandon risk entirely; it’s simply a reallocation to platforms that provide immediate stimulation.
Over the past decade, markets have grown to include a wide variety of high-frequency, high-volatility venues, from sports betting apps and gambling to ultra-leveraged exchange-traded funds (ETFs) and stock options that expire within a day.
These arenas offer the kind of instant gratification that appeals to speculators looking for asymmetric upside potential without the burden of patience, Cipolaro noted. Within crypto itself, this trend has seen activity in high-beta or fast-moving segments such as memecoin trading and leveraged perpetual swaps increase.
But even these crypto-native forms of speculation lose out to markets that offer even faster feedback loops. This drains liquidity and reflexivity from the broader crypto ecosystem, softening price discovery and diminishing the impact of speculative flows that once lifted assets like bitcoin, Cipolaro wrote.
The problem is not unique to crypto, it is indicative of a growing societal preference for winner-takes-most environments.
Bitcoin, on the other hand, increasingly looks like a slow asset in a fast market. Although its long-term performance remains strong (historically, holders of five-year securities have never made a loss), its short-term appeal has faded for those who prefer the emotional loop of quick bets and instant results.
Cipolaro argued that this does not undermine Bitcoin’s investment case, but creates obstacles to attracting marginal capital during periods of relative apathy or distraction.
“These dynamics disadvantage assets like bitcoin which, while capable of being traded at high frequency, are better suited to being held over long periods of time,” he wrote. “As attention and capital increasingly shift to faster, more responsive markets, slower-moving investment theses find it difficult to compete for mind share, even when their long-term return characteristics remain intact. »
It was expected that the rise of spot crypto ETFs would help revive retail interest, but that thesis now appears complicated by this simple behavioral constraint.
“Markets that offer ongoing engagement and immediate feedback attract speculative participation, even when expected returns are unfavorable,” Cipolaro wrote. “As a result, risk-seeking marginal capital is increasingly being absorbed into faster, more responsive venues, reducing participation in long-term investments such as bitcoin. »
