Author: Far Mountain Insight

Why did I answer the people around me like that?

Someone nearby asked me: Bitcoin dropped from 120,000 to 70,000, what do you think?

I said: Finally, no need to pretend. This is Bitcoin's most honest moment.

• When money is printed, people say it is to hedge against inflation.
• When ETFs are approved, people say it is recognized by institutions.
• When it crashes, people say it is a risk asset.

The narrative collapsed? Good riddance.

I often see many friends arguing: Is Bitcoin a safe-haven asset or a risk asset?

• Some use data to say: Look, when the US stock market drops, BTC also drops, definitely a risk asset, just like the Nasdaq.
• Some counter with history: In 2020 during the pandemic and the Russia-Ukraine war, BTC increased, clearly a safe haven.
• Others come out to mediate: BTC is an "alternative asset," which plays a role in diversifying risk in a portfolio, blablabla.

But what if I tell you that this debate itself is a false proposition?

Because Bitcoin's biggest problem right now is not "what it is," but that the market doesn't know what story to use to price it.

More accurately: The narratives that have hyped BTC over the years have collapsed one after another. But this might be the healthiest signal of this round of crash.

Starting from January 29,

that day the US stock market crashed, risk aversion sentiment rose, theoretically, if BTC is "digital gold," it should at least stabilize.

On the same day, the Federal Reserve was hawkish, Powell's successor Kevin Warsh is known for being hawkish, theoretically risk assets should drop.

So what happened?

BTC chose to plummet about 7% under these two completely opposing macro conditions, dropping from $96,000 to around $80,000.

Yes, the market doesn't know what logic to use to price BTC at all.

• When the stock market drops, it follows and drops, like a risk asset.
• When the Fed is hawkish, it drops too, also like a risk asset.
• But when gold rises, it doesn't rise, unlike a safe haven asset.

There's an interesting statistic: The correlation between BTC and the S&P 500 has been erratic before the ETF approval in January 2024. But after the ETF approval? The correlation surged directly, basically fluctuating in sync.

BTC has a slight negative correlation of 0.16 with the fear index VIX, but research shows: BTC declines often lead VIX increases.

It can be understood as: BTC is both a "risk asset that drops with the stock market" and a "risk asset that drops earlier than the stock market."

Isn’t this a kind of schizophrenia?

From $126,273 in October to currently $70,370, a drop of about 44%. Market capitalization has fallen from a peak of $2.5 trillion to approximately $1.4 trillion now. This week saw total liquidations of about $200 million of leveraged positions, and ETF net outflows since the beginning of the year should also be around $200 million.

Some say this is the beginning of a "death spiral." Michael Burry (yes, the one from "The Big Short") specifically wrote a note, saying this time might be BTC's "self-reinforcing crash," where the price drops, corporate financial reports are poor, forced to sell coins, and the price continues to drop.

It certainly looks pretty bleak. But what I want to say is: this is BTC's most authentic moment.

The three identities BTC has been packaged with over the years

From 2017 to 2024, BTC has undergone three "identity reshapes":

First: 2017—2020, the anti-government currency of Cyberpunk

The narrative at that time was "decentralized utopia," "against central bank printing," "code is law."

A group of people on Twitter shouted daily "Not your keys, not your coins," mocking fiat currency as a "government scam."

But this narrative had a problem: it was too niche.

People who could understand the spirit of cypherpunks number only in the hundreds of thousands worldwide. This narrative cannot support a trillion-dollar market cap.

Second: 2020—2023, Wall Street's "digital gold"

During the pandemic in 2020, with the Fed printing money without limit, institutions began to enter the market.

MicroStrategy's Michael Saylor led the charge in purchasing, Grayscale was creating trusts, and Tesla placed BTC on its balance sheet.

The narrative at that time became: "BTC has a limited supply, capped at 21 million coins, naturally hedging against inflation, is the gold of the digital age."

Sounds great, doesn’t it?

But in 2022, as US inflation surged to 9% (the highest in 40 years), BTC dropped 60%, while gold remained nearly flat or even slightly increased.

This narrative collapsed.

Third: 2024—2025, Nasdaq's technology growth stocks

In January 2024, the US approved the BTC spot ETF, with giants like BlackRock and Fidelity entering the market.

The narrative changed again: "BTC is an emerging technology asset, like AI and blockchain, representing the future."

But the problem arose: since it’s a tech stock, it must follow Nasdaq.

As a result, in 2026, when tech stocks corrected, BTC fell harder than anyone else.

This narrative also collapsed.

The narrative collapsed, then what?

Now BTC is in a very awkward state: there is no narrative.

People are arguing back and forth on Twitter, merely trying to find a "legitimate reason" for BTC.

But have you considered that BTC might not need a fixed identity at all?

It is just a mirror reflecting the market's most greedy or fearful emotions at the moment.

• In 2017 it reflected the fervor of a "decentralized utopia."
• In 2021 it reflected the greed of "the money printer being turned on."
• In 2026 it reflects the confusion of "I don't know what to believe."
• This answer sounds a bit vague.

But what I want to say is: the collapse of the narrative may be a good thing.

Why is the collapse of the narrative a good thing?

• First, those who were lured in by the "wrong narrative" can finally leave.

Institutions that rushed in in 2021 shouting "hedge against inflation" are now seeing ETF net outflows and have left. Those retail investors treating BTC as a tech stock leveraged out, also left.

Who is left?

It is those who don't care what BTC "is," only know "I just believe in this thing." You can say they are foolish, but at least they are honest.

• Second, BTC without a narrative actually gets closer to its essence.

BTC has no cash flow, no dividends, no rental income. Its value depends 100% on "how much the next buyer is willing to pay." This is purely a game of consensus.

When the narrative is still there, everyone can pretend "I am a rational investor."

But when the narrative collapses, one must admit: this is gambling.

What is being gambled? It is gambled that someone still believes.

• Third, this is not the first time, nor will it be the last time.

In 2018, BTC dropped from $20,000 to $3,000, a decline of 85%. At that time, people also said "the narrative collapsed", "the ICO bubble burst."

In 2022, BTC dropped from $69,000 to $16,000, a decline of 77%. At that time, people also said "the institutional narrative has bankrupted."

But look, it has risen back. Not because it found a "perfect narrative," but because there are always people who think: no matter what, I just find this thing interesting.

Returning to the initial question: What exactly is BTC?

Those arguing on Twitter about "safe haven or risk" may have forgotten one thing:

The market is not an examination room, assets do not need to have a standard answer.

Does BTC not know what it is?

That is because the market also doesn't know what it wants.

• In 2021, when money was printed, everyone said it was "hedging against inflation."
• In 2024, when the ETF was approved, everyone said it was "institutionally recognized."
• In 2026, during the crash, everyone said it was "a risk asset."

But have you thought that perhaps these are not BTC's problems, but that we are too eager to label it?

BTC is just BTC.

You are happy when it rises, upset when it falls, isn’t that enough?

Those who study "what it is" every day may actually want to ask:

“Can I find a reason to let myself believe it will rise again?”

But if you need a reason to believe, then you never believed in the first place.

Written at the end

Those who have been deceived by the stories of "digital gold," "hedging against inflation," "institutional entry," are now silent. Those who have truly remained are not because they are smart, but because they never needed a narrative.

Some may say: Isn't this just "recharging faith?"

Maybe so.

But I would rather believe: in a market full of uncertainties, admitting "I don't know what it is" is more honest than pretending "I know."

Go to hell with narratives.

Make money when it rises, hold on when it falls, or flee.

This is the most authentic form of the crypto market.

Although this answer is a bit vague, haha.

But at least it is more honest than those pretending to have a standard answer.

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