Bitcoin’s recent selloff reflects the asset’s inherent volatility and a market misreading of Federal Reserve policy rather than any structural weakness, according to hedge fund veteran Gary Bode.
The cryptocurrency has fallen nearly 50% from record highs reached just months ago, reigniting concerns about its stability. Bode, however, argues the decline is consistent with bitcoin’s historical behavior and does not signal a broader crisis.
In a post on X, Bode described the drop as “unpleasant and jarring,” but far from unprecedented. “Eighty to ninety percent drawdowns are common,” he wrote, adding that investors willing to endure bitcoin’s volatility have historically been rewarded with strong long-term returns.
Bode attributed much of the recent turbulence to market reactions surrounding the nomination of Kevin Warsh to succeed Jerome Powell as Federal Reserve chair. Investors interpreted the move as a sign the Fed could adopt a more hawkish stance, potentially pushing interest rates higher and weighing on non-yielding assets such as bitcoin, gold and silver. That interpretation, he said, triggered margin calls on leveraged positions and set off a wave of forced selling.
Bode disputes that view, pointing to Warsh’s past public support for lower rates and comments from President Trump suggesting Warsh had committed to a lower federal funds rate. He also noted that persistent, multi-trillion-dollar fiscal deficits limit the Fed’s ability to meaningfully influence longer-term Treasury yields, which play a larger role in corporate borrowing and mortgage rates. “I think the market got this one wrong,” Bode said, arguing that sentiment rather than fundamentals drove much of the selloff.
Other commonly cited explanations, he added, are also incomplete. One theory holds that early bitcoin holders, often referred to as “whales,” are selling large portions of their holdings. While Bode acknowledged that some large wallets have been active, he characterized the activity as routine profit-taking rather than a bearish signal. “The technical skill of the early adopters and miners is something to be applauded,” he said, adding that their partial or full exits say little about bitcoin’s long-term outlook.
Bode also flagged Strategy (MSTR) as a potential source of near-term pressure. The company’s shares fell after bitcoin dropped below the prices at which it accumulated much of its holdings, raising concerns that founder Michael Saylor could be forced to sell. Bode described the risk as real but limited, likening it to investor anxiety when Warren Buffett takes a large stake in a company. While such selling could temporarily weigh on prices, he said it would not undermine bitcoin’s long-term viability.
Another factor weighing on sentiment is the growth of so-called “paper bitcoin,” including ETFs and derivatives that provide price exposure without requiring ownership of the underlying asset. While these instruments expand the amount of bitcoin exposure available for trading, Bode said they do not change bitcoin’s fixed supply cap of 21 million coins. He compared the dynamic to the silver market, where expanded paper trading can initially suppress prices until physical demand reasserts itself.
Some analysts have also warned that rising energy costs could hurt bitcoin mining economics, potentially reducing the network’s hash rate and weighing on prices. Bode dismissed that argument as overstated, noting that historical data shows hash rate declines, when they occur, tend to lag price drops by months rather than lead them. He also pointed to emerging energy sources — including small modular nuclear reactors and solar-powered data centers — that could provide miners with cheaper power over time.
Addressing criticism that bitcoin fails as a store of value due to its volatility, Bode argued that nearly all assets carry risk, including fiat currencies issued by heavily indebted governments. “[…] Gold does require energy to secure unless you’re comfortable leaving it on your front porch,” he said. “Paper bitcoin can influence the short-term price, but long-term there are 21 million coins, and if you want to own bitcoin, that’s the real asset. Bitcoin is permissionless and requires no trust in a counterparty.”
Bode ultimately framed the latest downturn as a natural consequence of bitcoin’s design. Volatility, he said, is part of the tradeoff—and investors willing to withstand sharp swings may ultimately benefit. For now, he argues, dramatic price moves should not be mistaken for signs of systemic failure.
