I've been thinking a lot lately about why cryptocurrencies performed so poorly during this recent crash. Bitcoin dropped over 40% from its all-time high in October last year, and is now trading around $76.7k, with a market cap of approximately $1.54 trillion. It remains the largest crypto asset globally, but this correction has definitely raised some interesting questions.

When it comes to why cryptocurrencies crashed, I believe there are several factors worth examining closely. First is the macro environment. The U.S. government ran a $1.8 trillion budget deficit in fiscal year 2025, and national debt soared to a record $38.5 trillion. This should have increased demand for safe-haven assets. But what happened? Gold prices surged 64% throughout the year, yet Bitcoin investors were selling heavily at the same time, and Bitcoin still ended the year in the green. This contrast is quite revealing—it shows that when people truly need safe assets, they prefer gold over Bitcoin, which has dealt a blow to Bitcoin’s narrative as a store of value.

There’s also a deeper issue. One of the reasons many people previously believed in Bitcoin was its potential to become a widely accepted payment method, but that expectation is also softening. I remember in November last year, Cathie Wood of Ark Investment Management lowered her 2030 Bitcoin price target from $1.5 million to $1.2 million, citing that stablecoins are now a better option. This view actually reflects a subtle shift in the market—stablecoin trading volume hit $3.5 trillion in December (30-day moving average), surpassing the total of Visa and PayPal combined, and 50% of American consumers and 71% of Gen Z are willing to use stablecoins.

From a historical perspective, Bitcoin’s resilience is still notable. Anyone who bought Bitcoin in the past decade has made a profit, and Bitcoin’s performance has outpaced all major asset classes. But what’s different this time is that during the two major corrections in 2017-2018 and 2021-2022, Bitcoin fell over 70%. This suggests that the current 40% decline might not be the bottom yet.

Honestly, my outlook on Bitcoin has become more cautious. Some core arguments supporting it are being questioned, which is a serious signal to consider. If I really want to participate at this level, I’d keep my position small because risks still exist. But the story of this industry isn’t over—there’s still a logical chain explaining why cryptocurrencies can rebound after a crash, it just takes time to see if that holds.