Price is what you pay, but value is what you get, and it's easy to forget that axiom when the chart tilts south. Bitcoin's (BTC 0.44%) recent slide is a perfect example of this, as over the 30-day period ending on Oct. 17, its price declined about 9%, punctuated by the Oct. 10 flash crash that briefly pushed it even lower, near $105,000.
Pullbacks this size happen even in healthy uptrends, but this one arrived alongside macro worries spurred by newly announced tariffs on China. Nonetheless, many investors, especially crypto natives, are wondering aloud whether the coin's three-year bull run, which saw its price rise by 460%, is over. If it is, a bear cycle may be coming up next, so let's evaluate the situation carefully.
Image source: Getty Images.
What this pullback tells us
A short spell of downside sparked by external macro factors says more about investors' nerves and the fragility of the current crypto market sentiment than it does about Bitcoin's design or the validity of its investment thesis.
There is no new protocol update that suddenly enables issuing more coins or that something fundamental has changed irrevocably or otherwise. Bitcoin still has a hard limit of 21 million coins that can ever exist, with its mining difficulty mediated by periodic halvings, which make it harder to produce more with the same amount of effort.
CRYPTO: BTC
Key Data Points
But when it comes to placating skittish investors, zooming in on the factors driving the downturn can help a lot to shore up long-term conviction.
The October price slide coincided with a broad sell-off in risk assets and tariff headlines, not a blockchain failure. Bitcoin is not one of the altcoins that were shown to be nearly without a purchase bid during the flash crash. In other words, this recent decline was not caused by a loss of confidence in the asset itself or any malfunction of the protocol. It was caused largely by traders using excessive leverage, or debt, to trade illiquid altcoins.
If the bear case for the coin is that such a pullback marks the end of the halving-cycle bull leg, the burden of proof is on those making that claim. And so far, the proof doesn't exist. A 9% retreat from Bitcoin's all-time highs amid severe crypto market turbulence is not strong evidence by itself.
Furthermore, exchange-traded funds (ETFs) holding Bitcoin did not show panicky outflows during the flash crash, which matters significantly for gauging structural demand. Aggregate U.S. spot ETF flows around Oct. 10 were outflows of about $4.5 million, hardly a sign of investors stampeding for the door. If big, steady buyers and asset managers remain steady, it lowers the odds that a garden-variety dip morphs into a prolonged decline cycle.
That doesn't mean downside risk for holders is now gone.
If macro conditions worsen, and they might, Bitcoin can fall even lower. It's unclear whether the persistent sovereign and corporate Bitcoin buying will be enough to countervail that trend or boost its price.
Either way, the thesis for owning it relies on its consistently more constrained supply mechanics and its ongoing adoption. And those have not changed.
What to do about it
So, what should investors do with a 9% dip and some scary headlines? One reasonable approach is to buy the dip and be ready to hold it for the next few years, which is what I'll be doing.
But being aware of the future possibilities is smart, too.
In the next few months, prices can and will swing as new and evolving macro narratives come and go. In that vein, dollar-cost averaging (DCA) can reduce your risk of regretting your investment while letting you continue to add to your position when fear is elevated. Try to change your perspective and view deep dips as opportunities rather than emotional ordeals.
No matter what happens, remember that over the years, the halving schedule plus steady institutional use point to higher prices, even if the path is bumpy. If the bull run is over now, so be it; even if it is, your task is to ensure that you capture the most value, and that means planning ahead to own Bitcoin and letting its scarcity carry the price later on.
