Historically, Bitcoin’s reputation has been built on extreme boom and bust cycles, with steep declines of up to 90% following all-time highs.
This cycle, however, the drop has been closer to 50%, a change that analysts say reflects the maturation of BTC as an asset class.
“Bitcoin’s drop to about 50% is a sign of a mature market structure,” AdLunam co-founder and market analyst Jason Fernandes told CoinDesk.
“As liquidity deepens and institutional participation increases, volatility naturally compresses both up and down,” he added, saying that “at that point, the narrative shifts from questioning its legitimacy to optimizing allocation.”
Fernandes’ comments are in response to Fidelity Digital Assets analyst Zack Wainwright’s X post on Tuesday, in which he noted that growth is becoming “less impulsive,” with a reduced likelihood of extreme downside events as bitcoin matures.
‘Less dramatic’
Wainwright noted that the current drop from the Oct. 6 all-time high of just over $126,200 is much less significant than previous declines.
“Each cycle has been less dramatic on the upside than the last and the downside risk has also been less dramatic,” he said.
Fernandes and Wainwright, of course, were referring to previous “bust” periods, especially after the 2013 and 2017 peaks.
After peaking at around $1,163 in late 2013, bitcoin entered a prolonged “crypto winter” in which its price plummeted to around $152 in January 2015, representing a drop of approximately 87%. A similar pattern was seen after the 2017 bull run, when it reached $20,000 in December before falling approximately 84% to $3,122 over the following 12 months.
Not all analysts agree that a deeper reduction is out of the question.
Bloomberg Intelligence’s Mike McGlone told CoinDesk that he believes bitcoin could still experience a “normal reversal” toward $10,000, arguing that “the crypto bubble is over” and that any slowdown could coincide with broader declines in stocks, commodities and other risk assets.
However, Fernandes, who previously disagreed with McGlone’s $10,000 forecast, said the scale itself is part of the story. As bitcoin becomes a larger asset class, the probability of a 90% crash decreases simply because the capital required to fuel such moves is too large. That effect is reinforced by institutional integration, from ETFs to pension exposure, which makes large-scale liquidations structurally more difficult.
Portfolio ‘efficiency’ enhancer
The change is already manifesting itself in portfolio construction.
“Portfolio data is really what changes institutional behavior,” Fernandes said. “If a small allocation of 1% to 3% can materially improve returns and Sharpe ratios without significantly increasing drawdowns, then bitcoin begins to function less as a stand-alone bet and more as an efficiency enhancer within a diversified portfolio.”
That framework changes the calculation of risk. “The risk is no longer in owning bitcoins,” Fernandes said. “It’s the opportunity cost of not having any exposure.”
Recent Fidelity research supports that transition. In a 10-year comparison between major asset classes, bitcoin returned approximately 20,000%, significantly outperforming stocks, gold and bonds, while leading risk-adjusted measures despite its volatility.
“Bitcoin remains a relatively young asset, however, it has rapidly matured into a major asset class and has been the top-performing asset in 11 of the last 15 years,” the report notes.
At the same time, the trade-off is becoming clearer.
“There is a trade-off here worth articulating,” Fernandes said. “As bitcoin matures and volatility compresses, returns should also be expected to normalize. The asymmetric upside of the early cycles came with extreme drawdowns, but as those drawdowns taper off, the asset increasingly behaves like a macro allocation rather than a risk play.”
That brings us back to reductions.
If bitcoin is no longer down 80% and portfolios can benefit from small allocations without materially increasing risk, then the asset is evolving into something more investable and usable, Fernandes said, concluding that for institutions, that may be the real turning point.
