Bitcoin’s sharp decline – nearly 50% from its record highs reached just months ago – has reignited debate over the cryptocurrency’s stability, but hedge fund veteran Gary Bode says the selloff is a feature of the asset’s inherent volatility rather than a sign of a wider crisis.
In a post on X, Bode noted that while the recent price drop is “uncomfortable and jarring,” it’s not unusual in bitcoin’s history. “80% – 90% moves are common,” he said. “Those who have been willing to withstand the ever-temporary volatility have been well rewarded with incredible long-term returns.”
Much of the recent turbulence, he said, can be traced to market reactions to the nomination of Kevin Warsh to succeed Jerome Powell as chairman of the Federal Reserve. Investors interpreted the move as a signal that the Fed could take a hawkish stance, raising interest rates and making zero-yielding assets such as bitcoin, gold and silver relatively less attractive. Margin calls on leveraged positions compounded the decline and caused a cascade of forced selling.
However, Bode disputes the market’s interpretation. He pointed to Warsh’s public statements supporting lower interest rates and memos from President Trump suggesting Warsh promised a lower fed funds rate. Combined with Congress’s ongoing multitrillion-dollar deficit, Bode argued, the Fed has limited ability to influence long-term Treasuries — a key factor in corporate borrowing and mortgage rates. “I think the market got it wrong,” he said, stressing that perception, rather than fundamentals, drove much of the recent selloff.
Other commonly cited explanations, he said, also don’t tell the whole story. One theory is that “whales” — early bitcoin holders who mined or bought coins when prices were close to zero — are offloading holdings. While Bode acknowledges that large wallets have been active and that some big sellers have emerged, he portrays these moves as profit-taking rather than an indication of long-term weakness. “The technical skills of the early adopters and miners is something to be applauded,” he said. “That doesn’t mean their sales (in whole or in part) tell us much about the future of bitcoin.”
Bode has also flagged Strategy ($MSTR) as a potential source of short-term pressure. The company’s stock fell after bitcoin fell below the prices at which Strategy bought many of its holdings, prompting fears that Saylor might sell. Bode described this risk as real but limited, comparing it to when Warren Buffett buys a large stake in a company: investors like the support but worry about potential sales. He emphasized that bitcoin itself would survive such events, even if prices could temporarily fall.
Another factor is the emergence of “paper” bitcoin – financial instruments such as exchange-traded funds (ETFs) and derivatives that track the price of the crypto-asset without requiring ownership of the underlying coins. While these instruments increase the effective supply for trading, they do not change bitcoin’s hard cap of 21 million coins, which Bode said remains a crucial anchor for long-term value. He drew parallels to the silver market, where increased paper trading initially suppresses prices until physical demand pushes them higher.
Some analysts have suggested that rising energy prices could hurt bitcoin mining and reduce the network’s hash rate, potentially lowering long-term prices. Bode calls this theory overblown.
Historical data shows that previous bitcoin price drops did not consistently result in hash rate drops, and when drops did occur, they lagged months after the price drop.
He also pointed to new energy technologies — including small modular nuclear reactors and solar-powered AI data centers — that could provide low-cost power for mining in the future.
Bode also addressed criticism that bitcoin is not a “store of value.” While some argue that its volatility disqualifies it from this role, Bode points out that almost any asset carries risk — including fiat currencies backed by heavily indebted governments. “[…] Gold takes energy to secure unless you’re comfortable leaving it on your front porch,” he said. “Paper Bitcoin may affect the short-term price, but long-term there are 21MM coins that will be issued, and if you want to own Bitcoin, that’s the real asset. Bitcoin is permissionless and requires no trust in a counterparty.”
Ultimately, Bode’s assessment frames the recent decline as a natural consequence of bitcoin’s design. Volatility is part of the game, and those willing to endure it may ultimately be rewarded. For investors, the most important thing is that price fluctuations, no matter how dramatic, are not necessarily a signal of systemic risk.
