Bitcoin’s sharp decline – down nearly 50% from its all-time high set just months ago – has reignited debate over the cryptocurrency’s stability, but hedge fund veteran Gary Bode said the sell-off was a feature of the asset’s inherent volatility rather than a sign of a wider crisis.
In a post on X, Bode noted that while the recent price drop is “unpleasant and disturbing,” it is not unusual in Bitcoin’s history. “Retracements of 80 to 90 percent are common,” he said. “Those who are willing to endure temporary volatility have reaped incredible long-term returns.”
He said much of the recent turmoil can be traced to the market’s reaction to the nomination of Kevin Warsh to succeed Jerome Powell as Fed chairman. Investors interpreted the move as a signal that the Federal Reserve could 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, leading to a cascade of forced selling.
However, Bode disputes the market explanation. He pointed to Warsh’s public statements supporting lower interest rates and President Trump’s remarks suggesting Warsh was committed to lowering the federal funds rate. Bode believes that, coupled with Congress’s ongoing trillion-dollar deficits, the Fed’s ability to influence long-term Treasury yields, a key factor in corporate borrowing and mortgage rates, is limited. “I think the market is making a mistake on this,” he said, emphasizing that perception, not fundamentals, was the main factor driving the recent selloff.
Other common explanations also fail to tell the full story, he said. One theory is that “whales” — early Bitcoin holders who mined or bought Bitcoin when the price was near zero — are selling off their holdings. While Bode acknowledged that big wallets have been active and there have been some big sellers, he viewed these moves as profit-taking rather than a sign of longer-term weakness. “The technical capabilities of early adopters and miners deserve credit,” he said. “That doesn’t mean their sales (in whole or in part) tell us much about the future of Bitcoin.”
Bode also flagged Strategy ($MSTR) as a potential source of short-term pressure. The company’s stock price fell after Bitcoin fell below the price at which Strategy purchased a majority of its shares, raising concerns that Thaler may sell shares. Bode describes this risk as real but limited, compared to Warren Buffett buying a large stake in a company: Investors like the support but worry about the eventual sale. He emphasized that Bitcoin itself will survive such an event, although the price may fall temporarily.
Another factor is the rise of “paper” Bitcoin – financial instruments such as exchange-traded funds (ETFs) and derivatives that can track the price of the crypto asset without owning the underlying currency. While these tools increase the effective supply available for transactions, they do not change Bitcoin’s hard cap of 21 million BTC, which Bode said remains an important pillar of long-term value. He compared the market for silver, where an increase in paper transactions initially suppressed prices until physical demand pushed prices higher.
Some analysts say rising energy prices could hurt Bitcoin mining and reduce the network’s hash rate, potentially lowering long-term prices. Bode said the theory was exaggerated.
Historical data shows that past Bitcoin price drops have not always resulted in hash rate drops, and when they do occur, they lag price drops by months.
He also pointed to emerging energy technologies—including small modular nuclear reactors and solar-powered artificial intelligence data centers—that could provide low-cost power for the mining industry of the future.
Bode also responded to criticism that Bitcoin is not a “store of value.” While some argue its volatility prevents it from playing this role, Bode noted that nearly all assets carry risks — including fiat currencies backed by debt-ridden governments. “[…] Gold does require energy to protect, unless you’re willing to leave it on your front porch,” he said. “Paper Bitcoin can affect short-term prices, but in the long run, there will be $21MM of coins issued, and if you want to own Bitcoin, that’s the real asset. Bitcoin is permissionless and requires no trust in counterparties. “
Ultimately, Broad’s assessment sees the recent decline as a natural consequence of Bitcoin’s design. Volatility is part of the game, and those who are willing to tolerate it may be rewarded in the end. The key takeaway for investors is that price movements, no matter how dramatic, are not necessarily a sign of systemic risk.
