The Bitcoin Bottom: Why It’s Falling and When to Buy

Today’s Letter is Brought To You by Abra ! Borrow up to 50% of the value of your crypto holdings with Abra in a highly flexible open term loan. Your collateral is held in a separately managed account where you retain legal title to the assets. Rates are highly competitive, ranging from 4-7%APY. No interest payments are required during the life of the loan. There are no minimums or maximum loan sizes. To learn more, click here . To set up an account, click here for individuals and here for entities. Set Up An Account Today! To investors, Bitcoin launched more than 15 years ago under the promise of creating peer-to-peer electronic cash. Millions of people got excited about the prospect of a decentralized, digital currency serving as a check on central banks and governments around the world. This explosion of adoption and demand led the asset from a penny to over $126,000 in less than two decades. Not bad for a piece of technology that was mocked, ridiculed, and fought along the way. But bitcoin has fallen approximately 50% from the all-time high and the skeptics are taking victory laps saying “I told you so!” Are they right? And why has bitcoin fallen so aggressively? Before I explain the drivers of bitcoin’s fall, we have to contextualize bitcoin’s recent drop with prior bear markets where the asset fell 85% or more on numerous occasions. These past boom-bust cycles were the product of abnormal volatility, which may have been one of the largest drivers of attention and adoption for bitcoin. If you look at the last few months, bitcoin is down approximately 48% from the cycle top . Bitcoin had fallen about 50% at this stage of the bear market in 2018 and about 30% at this stage of the bear market in 2022. I am not sure investors covet the consolation prize of “bitcoin always does this!,” but at least the data supports the argument. Next, we have to ask ourselves why bitcoin has been selling off. There is a lot to unpack here, so I will do my best to outline the various components and complexity. First, many investors have been believers in the 4-year cycle. They were expecting bitcoin to peak in Q4 of 2025, so they started to sell at the end of September and early October in anticipation of that development. Second, some of the largest individual bitcoin holders have been holding the asset for more than a decade. The $100,000 per coin milestone served as a psychological finish line for some portion of these people, which led them to sell many of their bitcoin in the second half of last year. Third, bitcoin has become more financialized with the adoption of the asset by Wall Street. The various financial products allow investors to gain exposure in different ways, while collectively dampening volatility on the asset. That lack of volatility is attractive to large pools of capital, but it is a big deterrent for individual investors. These three reasons seem logical enough, but I am starting to think there is an even more important reason that bitcoin sold off so aggressively: bitcoin is sounding the alarm on liquidity and deflation. We know that inflation is falling in the United States. The government’s inflation metric fell from 2.7% to 2.4% in the last reading and Truflation is showing real-time inflation around 1% right now. Remember, Truflation has a 97% correlation to CPI with a 1-month lag. This means we should expect inflation to continue falling aggressively in the government metrics over the next 2-3 months. Roger Montgomery points out that “Cross Border Capital’s Michael Howell believes a 5-6-year cycle exists in the underlying momentum of the components of global liquidity. Right now, the outlook is bleak because Global Liquidity has peaked, is entering a downswing, and the next trough isn't expected until 2027.” If Howell is right, the short-term performance of bitcoin and other asymmetric assets may be less than ideal. Not only do you have decreasing global liquidity, but you also have the deflationary impact of tariffs, deportations, artificial intelligence and robotics. That is a total of five negative trends that would create a significant headwind for bitcoin through 2026. But I don’t come with only bad news. These price drawdowns in the digital currency tend to be gifts to long-term oriented investors. X user “PricedInBitcoin” writes “Bitcoin is down 47% from the all-time high. Historically, buying at -50% drawdown has a 90% win rate over 1 year with a median return of +95%. At -70%, the win rate is 100%. Never lost. Worst outcome was still +25%. LOCK IN.” So now the ball is in your court as an investor. We know all assets, including bitcoin, are getting hammered by the perfect storm of contracting liquidity and deflationary forces. When you decide to start allocating your capital into the market is your choice. History suggests buying assets at a discount tends to be a good idea. The biggest question in my mind is “when?!” Hope everyone has a great day. I’ll talk to you tomorrow. - Anthony J. Pompliano Founder & CEO, Professional Capital Management The Fed Wants To Stop Bitcoin & Crypto?! | Caitlin Long Caitlin Long is the founder and CEO of Custodia Bank and a pioneer at the intersection of traditional finance and crypto. This conversation was recorded live at Bitcoin Investor Week in New York. In this conversation, we break down stablecoins, tokenized deposits, and U.S. banking regulation, explaining why stablecoins were pushed outside the banking system and how tokenized dollars could reshape payments and markets. We also discusses custody risk, bank account closures, bitcoin ETFs, and the key barriers still slowing crypto’s integration into traditional finance. Podcast Sponsors Figure – True DeFi Democratized Prime to earn ~9% APY! They also have the lowest industry interest rates at 8.91% with 12 month terms! Take out a Bitcoin Backed Loan today and buy more Bitcoin. Check out Figure ! Figure Lending LLC dba Figure. Equal Opportunity Lender. NMLS 1717824. Terms and conditions apply. Arch Public - Arch Public’s cutting-edge algorithm tools ignite profits, harnessing razor-sharp data analytics to nail perfect entries, exits, and risk management. Turn volatility into opportunity and do it hands free with Arch Public. (Oh, and yes, try us out for FREE too!) Figure – Enter to win $25k USDC with Democratized Prime while earning ~9% APY! They also have the lowest industry interest rates at 8.91% with 12 month terms! Take out a Bitcoin Backed Loan today and buy more Bitcoin. Check out Figure ! 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