On Jan. 20, Bitcoin (BTC +1.63%) hit a new all-time high of more than $109,000. At the time, many investors were expecting the pro-crypto policies of the incoming Trump administration to send the price of Bitcoin soaring even higher.
In fact, quite the opposite has happened. Bitcoin is now down about 25% since Jan. 20. At a current price of $82,000, it is now close to where it was back in November 2024, when crypto euphoria reignited. Should investors be concerned?
Bitcoin's historical track record
The first thing you should know is that Bitcoin has gone through many price swings in its history that have been much more violent and unexpected than the one we are currently experiencing. In fact, Cathie Wood of Ark Invest has tracked at least five different times in Bitcoin's history when it has lost 77% or more of its value.
The current downturn pales in comparison. That said, it's important to keep a long-term outlook. That's because it can sometimes take time for Bitcoin to recover from any pullback. According to Wood, you should plan to hold your Bitcoin for several years to maximize your portfolio returns.
Image source: Getty Images.
In 2024, she analyzed Bitcoin's performance over a variety of different time periods (three, four, five, six, and seven years) and found that Bitcoin outperformed every major asset class during all of these longer-term horizons. In fact, Bitcoin delivered average annualized returns of 44%, while other major asset classes delivered just 5.7%. That's particularly impressive, given that Bitcoin lost 65% of its value in 2022.
CRYPTO: BTC
Key Data Points
Even more impressive, the returns actually improved over time. In other words, an investor who held Bitcoin for four years outperformed an investor who held Bitcoin for three years. And an investor who held Bitcoin for five years outperformed an investor who held Bitcoin for four years. You get the idea -- the longer you hold your Bitcoin, the better your performance.
Bitcoin's volatility
There's another factor in Bitcoin's favor: its volatility is actually declining over time. This might come as a shock to many investors, given all the headlines about Bitcoin's volatility during the past month. You can think of volatility as the amount that Bitcoin's price fluctuates (either up or down) over a specific time period.
The crypto data platform Coinglass tracks the historical volatility of Bitcoin over rolling 30-day periods. According to its latest data, Bitcoin's current 30-day historical volatility is roughly 3.5%. It has remained consistently under 4% during the past two years.
By comparison, during the previous crypto bull market rally in 2020–2021, Bitcoin's 30-day volatility was sometimes as high as 9%. Earlier in Bitcoin's history, its 30-day volatility has been as high as 15%. Thus, if you look at a Bitcoin volatility chart, you'll see that price oscillations are getting relatively smaller over time.
Even with the current market turbulence, it is easy to find headlines asking, "Why is Bitcoin's price stuck?" Until recently, investors were concerned that Bitcoin was not volatile enough and, therefore, not capable of breaking out of a narrow trading range.
This might be a case of being careful what you ask for. Investors wanted more volatility, and they got it. The only problem, of course, is that Bitcoin broke out of its narrow trading range to the downside, not the upside.
Is Bitcoin a haven asset?
In summary, Bitcoin's recent price decline is nothing out of the ordinary, and its volatility is actually lower than it has been historically. That should provide a modicum of comfort to investors thinking about selling their Bitcoin.
However, there is one important factor that has changed dramatically, and that's investor perceptions. It's getting harder and harder to make the argument that Bitcoin is a store of value or a hedge against recession when it keeps on falling alongside stocks. In short, Bitcoin might not be the haven asset that it was once considered.
That's showing up in the form of investor outflows out of the new spot Bitcoin exchange-traded funds (ETFs). During the 30-day period ended March 14, $5 billion flowed out of Bitcoin ETFs, and $10 billion flowed into gold ETFs. This leads to the very obvious narrative: Investors now view gold as a better store of value than Bitcoin.
So, what does all this mean for investors? If you are taking only a short-term view of the market, it might make sense to move some money from Bitcoin into gold. But if you're taking a medium- to long-term view of the market, it makes sense to do what Bitcoin investors have been doing for more than 15 years: you HODL (Hold On for Dear Life) your Bitcoin and wait for it to resume its market ascent.
