Historically, Bitcoin’s reputation has been built on extreme boom and bust cycles, with steep declines of up to 90% after all-time highs.
However, the decline this cycle has reached nearly 50%, and analysts say this shift reflects the maturation of BTC as an asset class.
AdLunam co-founder and market analyst Jason Fernandes told CoinDesk: “Bitcoin’s retracement has compressed to around 50%, which is a sign of mature market structure.”
“Volatility will naturally compress on both the upside and the downside as liquidity deepens and institutional participation increases,” he added. “That’s when the narrative shifts from questioning its legitimacy to optimizing allocations.”
Fernandez’s comments came in response to a Tuesday X post from Fidelity Digital Assets analyst Zack Wainwright, in which he noted that as Bitcoin matures, growth becomes “less impulsive” and the likelihood of extreme downside events decreases.
“Less dramatic”
Wainwright noted that the current decline from the October 6 all-time high of just over $126,200 is much smaller than previous pullbacks.
“The upside risks in each cycle are less severe than the previous cycle, and the downside risks are less severe than the previous cycle,” he said.
Of course, Fernandez and Wainwright were referring to previous “bust” periods, especially after the peaks in 2013 and 2017.
After reaching a high of about $1,163 in late 2013, Bitcoin entered a long “cryptocurrency winter,” with its price plummeting to around $152 by January 2015, a drop of approximately 87%. A similar pattern followed the 2017 bull run, when it hit $20,000 in December before plunging roughly 84% to $3,122 over the next 12 months.
Not all analysts believe further funding cuts are unlikely.
Bloomberg Intelligence’s Mike McGlone told CoinDesk that he believes Bitcoin could still “normally return” to $10,000 and believes the “crypto bubble is over,” with any downturn likely to coincide with broader declines in stocks, commodities and other risk assets.
However, Fernandez, who has previously disputed McGlone’s $10,000 forecast, said scale itself is part of the story. As Bitcoin develops into a larger asset class, the likelihood of a 90% crash decreases simply because the capital required to drive such a move is so great. This effect is reinforced by institutional consolidation from ETFs to pension exposures, which makes large-scale unwinding structurally more difficult.
Portfolio “efficiency” enhancer
This shift is already showing up in portfolio construction.
“Portfolio data really changes institutional behavior,” Fernandez said. “If a small allocation of 1% to 3% can significantly improve returns and Sharpe ratios without significantly increasing drawdowns, then Bitcoin functions less like a standalone bet and more like an efficiency enhancer in a diversified portfolio.”
This framework changes the risk calculation. “The risk is no longer in owning Bitcoin,” Fernandez said. “It’s the opportunity cost of absolutely no exposure.”
Recent research from Fidelity supports this shift. In a 10-year comparison of major asset classes, Bitcoin has returned approximately 20,000%, significantly outperforming stocks, gold, and bonds, while also leading on risk-adjusted measures despite its higher volatility.
“Bitcoin is still a relatively young asset, but it has rapidly matured into a major asset class and has been the top-performing asset in 11 of the past 15 years,” the report states.
At the same time, the trade-offs are becoming clearer.
“There’s a trade-off here that’s worth clarifying,” Fernandez said. “As Bitcoin matures and volatility compresses, you should also expect returns to normalize. The asymmetric rise in the early cycle was accompanied by extreme drawdowns, but as drawdowns shrink, the asset behaves more and more like a macro allocation and less like a venture capital-style bet.”
This is back to the retracement.
Fernandez said that if Bitcoin stops falling 80% and portfolios can benefit from small allocations without significantly increasing risk, the asset will evolve into something more suitable for investment and use, concluding that this could be a real inflection point for institutions.
