Bitcoin humbles Wall Street faithful after $600 billion plunge

Across trading desks and social media, anxiety is creeping in. Traders are cycling through old charts, dusting off familiar theories, scouring for buyers. With no traditional Wall Street playbook for how Bitcoin should behave — no stable correlation, no proven risk framework — some default to the model they know best: the four‑year halving cycle.

That’s the event that sees Bitcoin’s supply growth cut in half, by design, around every four years. Historically, it’s spurred speculative booms followed by painful busts, often with a lag as miners — operators of powerful computers supporting the network — tend to unload their holdings just as prices sour.

This cycle, the halving took place in April 2024. Then came the price peak this October. That roughly fits the old rhythm. But with deep-pocketed buyers shaping the market, it’s no longer clear the script still applies.

“The sentiment in retail crypto is so bad that there could still be some downside in the market,” said Matthew Hougan, chief investment officer at Bitwise Asset Management, who believes prices will go up next year. “People are afraid that the four-year cycle might repeat, and they don’t want to live through another 50% pullback. People are front-running that by stepping out of the market.”

Some of the damage reflects hangover and exhaustion. Retail cash got torched chasing crypto-treasury stocks at the highs. Then in early October, a surprise escalation in trade tensions triggered liquidations — just as leverage boomed. The result: a market long on expectations, short on conviction and too fragile to catch the knife once sentiment flipped.

All this, just as the pro-crypto story looked strongest. ETFs hauled in billions by midyear, recasting Bitcoin as a macro hedge. US President Donald Trump’s pro-crypto policies promised even more upside. But flows stalled. Some longtime holders cashed out. And poster firms like Strategy Inc. now trade close to the value of their Bitcoin holdings — a sign conviction is no longer commanding a premium.

“At this point, Bitcoin trades much more like a macro asset embedded in institutional portfolios, responding to liquidity, policy, and dollar dynamics more than to mechanically predictable supply shocks,” said Jake Kennis, an analyst at crypto data firm Nansen.

Despite all the talk of institutionalization, the market still trades on vibes. And right now, the vibes are bad. Risk appetite has rolled over. Altcoins are down hard this year. And the Trump boost hasn’t insulated crypto from macro drag — or from competition with new speculative darlings like AI, stablecoins and prediction markets.

With gold and stocks near all-time highs, Bitcoin is the “tip of the risk-assets iceberg and melting,” said Mike McGlone, senior commodity strategist at Bloomberg Intelligence. “I expect Bitcoin and most cryptos to keep falling.”

The market plumbing is intact, and Bitcoin is still up meaningfully since Trump’s election win. But for an asset expected by some to hit $200,000 by the end of the year, the recent slump feels like a letdown. If Bitcoin can’t break out with policy support, growing mainstream adoption and financial scaffolding in place — when can it?

At this point, it may be traders’ nervousness over history repeating itself that “makes the four-year cycle happen,” said Eric Balchunas, ETF analyst at Bloomberg Intelligence. On the other hand, he added, “the typical rhythms may be thrown off a little, or be thrown off permanently.”

Derek Lim, head of research at crypto market maker Caladan, said the Bitcoin bull runs of 2017 and 2021 weren’t simply the result of the halving events that preceded them, but of “a more powerful and fundamental driver: global liquidity.” That may return now that the US government shutdown has come to an end, he added.