Bitcoin’s downturns are lessening, catching the attention of Wall Street.

Not all experts concur that further declines are a thing of the past, as Bloomberg Analyst Mike McGlone asserts the crypto bubble has burst and bitcoin may still drop to $10,000.

Some experts suggest that bitcoin is evolving and may experience fewer extreme downturns, while others maintain that a significant decline may still occur. (Austin Distel/Unsplash/Modified by CoinDesk)

What to know:

• Bitcoin’s most recent decline has approached 50%, contrasting with the 80% to 90% drops seen in earlier cycles, which analysts interpret as indicative of a maturing market structure and increased liquidity.
• Proponents argue that as institutional engagement rises, bitcoin’s volatility and chances of severe downturns lessen, enabling it to serve more as a portfolio optimization tool rather than a speculative gamble.
• While some, including a Bloomberg strategist, continue to caution about a potential fall to $10,000, others argue that bitcoin’s size, incorporation into ETFs and pensions, and robust long-term risk-adjusted returns render such declines less likely.

Historically, bitcoin’s reputation has been founded on extreme boom-and-bust cycles, with steep declines of up to 90% following all-time highs.

In this cycle, however, the downturn has been closer to 50%, a change that analysts attribute to the maturation of BTC as an asset class.

“Bitcoin’s drawdowns compressing to about 50% is a sign of a maturing market structure,” AdLunam co-founder and market analyst Jason Fernandes shared with CoinDesk.

“As liquidity deepens and institutional participation increases, volatility naturally compresses on both the upside and the downside,” he remarked, indicating that “at that point, the narrative shifts from questioning its legitimacy to optimizing allocation.”

Fernandes’ remarks respond to Fidelity Digital Assets analyst Zack Wainwright’s X post on Tuesday, in which he observed that growth is becoming “less impulsive,” with a decreased likelihood of extreme downward events as bitcoin develops.

‘Less dramatic’

Wainwright noted that the current decline from the Oct. 6 all-time-high of just over $126,200 is significantly less severe than earlier pullbacks.

“Each cycle has been less dramatic to the upside than the previous and downside risk has also been less dramatic,” he stated.

Fernandes and Wainwright were, of course, referencing earlier “bust” periods, particularly following the peaks of 2013 and 2017.

After hitting a peak of around $1,163 in late 2013, bitcoin entered an extended “crypto winter,” which saw its price drop to approximately $152 by January 2015, marking a decline of about 87%. A similar trend occurred after the 2017 bull market, when it reached $20,000 in December before falling roughly 84% to $3,122 over the subsequent 12 months.

Not all experts agree that deeper declines are off the table.

Bloomberg Intelligence’s Mike McGlone informed CoinDesk that he believes bitcoin might still experience a “normal reversion” towards $10,000, arguing that “the crypto bubble is over” and any downturn could align with overall declines in equities, commodities, and other risk assets.

However, Fernandes, who has previously disagreed with McGlone’s $10,000 prediction, stated that the scale itself is part of the narrative. As bitcoin evolves into a larger asset class, the chances of 90% collapses diminish simply because the capital required to instigate such movements is substantial. This effect is further strengthened by institutional integration, from ETFs to pension involvement, which makes large-scale unwinds structurally more difficult.

Portfolio ‘efficiency’ enhancer

The transition is already evident in portfolio construction.

“The portfolio data is what truly influences institutional behavior,” Fernandes remarked. “If a modest 1% to 3% allocation can significantly enhance returns and Sharpe ratios without markedly increasing drawdowns, then bitcoin begins to operate less as a standalone wager and more as an efficiency enhancer within a diversified portfolio.”

This perspective alters the risk assessment. “The risk isn’t about owning bitcoin anymore,” Fernandes emphasized. “It’s the opportunity cost of having no exposure at all.”

Recent research from Fidelity supports this transition. In a decade-long comparison across major asset classes, bitcoin yielded approximately 20,000% returns, greatly surpassing equities, gold, and bonds, while also leading in risk-adjusted measures despite its volatility.

“Bitcoin remains a relatively young asset, yet it has swiftly matured into a significant asset class and has been the top-performing asset in 11 out of the past 15 years,” the report highlighted.

Concurrently, the tradeoff is becoming more apparent.

“There’s a tradeoff here that’s critical to articulate,” Fernandes noted. “As bitcoin matures and volatility reduces, you should also anticipate returns to normalize. The asymmetric upside of the early cycles came with extreme drawdowns, but as those drawdowns shrink, the asset increasingly behaves like a macro allocation rather than a venture-style bet.”

This brings the focus back to the drawdowns.

If bitcoin is no longer experiencing 80% declines, and portfolios can gain from small allocations without substantially increasing risk, then the asset is evolving into something more investable and practical, Fernandes concluded, asserting that for institutions, this could represent the true turning point.