Author: Yuanshan Insight
Why did I answer people around me like this?
Someone around me asked: Bitcoin dropped from 120k to 70k, what do you think?
I said: Finally, we don't have to pretend anymore. This is Bitcoin's most honest moment.
- When money was printed, everyone said it was a hedge against inflation.
- When the ETF was approved, everyone said it was institutional recognition.
- When it crashed, everyone said it was a risk asset.
Narrative collapsed? Good riddance.
I often see many friends arguing: Is Bitcoin a safe-haven asset or a risk asset?
- Some cite data: Look, when stocks fall, BTC falls too, clearly a risk asset, just like Nasdaq.
- Others refute with history: During the 2020 pandemic and the Russia-Ukraine war, BTC rose, clearly a safe-haven asset.
- Some institutions try to mediate: BTC is an "alternative asset" that helps diversify risk in a portfolio, blablabla.
But what if I told you this debate is a false proposition?
Because Bitcoin's biggest problem right now isn't "what it is," but that the market doesn't know what story to use to price it.
More accurately: The narratives that hyped BTC to the moon over the years are collapsing one after another. But this might be the healthiest signal from this plunge.
Let's start from January 29th.
That day, US stocks plummeted, safe-haven sentiment rose. In theory, if BTC were "digital gold," it should at least hold steady.
The same day, the Fed turned hawkish; Powell's successor Kevin Warsh is notoriously hawkish. In theory, risk assets should fall.
And then?
BTC chose to plunge about 7% under these two completely opposite macro conditions, dropping from ~$96,000 to near $80,000.
Yes, the market simply doesn't know what logic to use to price BTC.
- Stocks fall, it falls too, like a risk asset.
- Fed is hawkish, it falls too, also like a risk asset.
- But gold rises, it doesn't rise, so not like a safe-haven asset.
An interesting data point: The correlation between BTC and the S&P 500 was erratic before the January 2024 ETF approval. But after the ETF approval? The correlation soared, basically moving in sync.
BTC and the fear index VIX have a slight negative correlation of 0.16, but research shows: BTC's decline often leads VIX's rise.
This can be understood as: BTC is both a "safe-haven asset that falls with stocks" and a "risk asset that falls earlier than stocks."
Isn't this schizophrenia?
From the October high of $126,273 to the current ~$70,370, a drop of about 44%. Market cap fell from a peak of $2.5 trillion to currently about $1.4 trillion. Total liquidations this week were about $200 million in leveraged positions; ETFs have seen a net outflow of about $200 million year-to-date.
Some say this is the start of a "death spiral." Michael Burry (yes, the one from The Big Short) specifically sent a note saying this might be BTC's "self-reinforcing crash": price falls, company earnings look bad, forced to sell coins, price continues to fall.
It does look pretty bad. But what I want to say is: This is BTC's most real moment.
Those Three Packaged Identities of BTC Over the Years
From 2017 to 2024, BTC underwent three "identity reshapings":
First: 2017—2020, Cyberpunk's Anti-Government Currency
The narrative back then was "decentralized utopia," "fighting central bank money printing," "code is law."
A bunch of people on Twitter yelled "Not your keys, not your coins," mocking fiat as a "government scam."
But this narrative had a problem: too niche.
The number of people globally who understand cypherpunk spirit is probably only a few hundred thousand. This narrative couldn't support a trillion-dollar market cap.
Second: 2020—2023, Wall Street's "Digital Gold"
In 2020, with the pandemic, the Fed printed money infinitely, and institutions started entering.
MicroStrategy's Michael Saylor led the buying, Grayscale created a trust, Tesla put BTC on its balance sheet.
The narrative then became: "BTC supply is limited, capped at 21 million, naturally hedges against inflation, is digital gold for the era."
Sounds beautiful, right?
But in 2022, when US inflation surged to 9% (a 40-year high), BTC fell 60%, while gold was almost flat or even rose slightly.
This narrative, collapsed.
Third: 2024—2025, Nasdaq's Tech Growth Stock
In January 2024, the US approved spot BTC ETFs, giants like BlackRock and Fidelity entered.
The narrative changed again: "BTC is an emerging tech asset, like AI and blockchain, representing the future."
But the problem arose: If it's a tech stock, then it has to follow Nasdaq.
Result: In 2026, when tech stocks corrected, BTC fell harder than anyone.
This narrative, also collapsed.
The narrative collapsed, so what?
BTC is now in a very awkward state: it has no narrative.
The arguing on Twitter is just trying to find a "justification" for BTC.
But have you considered that maybe BTC doesn't need a fixed identity at all?
It is a mirror, reflecting the market's current greed or fear.
- In 2017, it reflected the狂热 (fanaticism) of "decentralized utopia"
- In 2021, it reflected the greed of "money printer go brrr"
- In 2026, it reflects the迷茫 (confusion) of "I don't know what to believe"
- This answer might sound a bit abstract.
But what I want to say is: The collapse of the narrative might actually be a good thing.
Why is the narrative collapse a good thing?
- First, those who were lured in by the "wrong narrative" can finally leave.
The institutions that rushed in yelling "hedge against inflation" in 2021 are now seeing ETF net outflows; those who should leave, are leaving. The retail investors who speculated on BTC as a tech stock, their leverage got liquidated, they're gone too.
Who's left?
Those who simply don't care "what" BTC is, only knowing "I just believe in this thing." You can call them foolish, but at least they are honest.
- Second, BTC without a narrative is closer to its essence.
BTC inherently has no cash flow, no dividends, no rental income. Its value is 100% dependent on "how much the next buyer is willing to pay." This is a pure game of consensus.
When the narrative existed, people could pretend "I'm investing rationally."
But when the narrative collapses, one must admit: This is gambling.
Gambling on what? Gambling that someone else will still believe.
- Third, This is not the first time, nor will it be the last.
In 2018, BTC fell from $20,000 to $3,000, an 85% drop. People also said "narrative collapsed," "ICO bubble burst."
In 2022, BTC fell from $69,000 to $16,000, a 77% drop. People also said "the institutional narrative is bankrupt."
But look, it rose again. Not because it found a "perfect narrative," but because there are always people who think: Whatever it is, I just find this thing interesting.
Back to the initial question: What is BTC?
Those arguing on Twitter about "safe-haven or risk" might have forgotten one thing:
The market is not an exam hall; assets don't need a standard answer.
BTC doesn't know what it is?
That's because the market doesn't know what it wants either.
- When money was printed in 2021, everyone called it a "hedge against inflation."
- When the ETF was approved in 2024, everyone called it "institutional recognition."
- When it crashed in 2026, everyone called it a "risk asset."
But have you considered that maybe these aren't BTC's problems, but that we are too eager to label it?
BTC is just BTC.
It goes up, you're happy; it goes down, you feel bad. Isn't that enough?
Those who constantly research "what it is" might actually be asking:
"Can I find a reason to believe it will go up again?"
But if you need a reason to believe, then you never truly believed in the first place.
Written in the end
Those who relied on stories like "digital gold," "hedge against inflation," "institutional adoption" to忽悠 (hype) people are now silent. Those who truly remain aren't there because they are smart, but because they simply don't need a narrative.
Some might say: Aren't you just engaging in "faith-based investing"?
Maybe.
But I prefer to believe: In a market full of uncertainty, admitting 'I don't know what it is' is more honest than pretending 'I know'.
Screw the narrative.
Make money when it rises, hold on or bail when it falls.
This is the truest form of the crypto market.
Even if this answer is a bit abstract, haha.
But it's at least more honest than those who pretend to have the standard answer.
