Bitcoin’s 50% Plunge Sparks Debate, But Veteran Investor Gary Bode Calls It a Feature, Not a Bug

Bitcoin’s recent freefall—nearly halving from its record highs achieved just months ago—has sent shockwaves through the crypto world, reigniting fierce debate over the digital asset’s stability. But according to hedge fund veteran Gary Bode, the brutal selloff is less a sign of impending doom and more a feature of bitcoin’s inherent volatility—a characteristic that, while “unpleasant and jarring,” is nothing new for seasoned crypto investors.

In a widely circulated post on X, Bode reminded the market that 80% to 90% drawdowns are practically routine in bitcoin’s tumultuous history. “Those who have been willing to stomach the always-temporary volatility have been well-rewarded with incredible long-term returns,” he asserted, offering a steadying hand to jittery investors.

So, what’s behind the latest crypto carnage? Bode points the finger squarely at market overreaction to the nomination of Kevin Warsh to succeed Jerome Powell as Federal Reserve chair. Investors, he argues, misinterpreted the move as a hawkish signal—raising fears of higher interest rates and making zero-yield assets like bitcoin, gold, and silver less attractive. Margin calls on leveraged positions only added fuel to the fire, triggering a cascade of forced selling that sent prices spiraling.

But Bode isn’t buying the market’s logic. He highlights Warsh’s public statements supporting lower rates and notes from President Trump suggesting Warsh promised a reduction in the fed funds rate. With Congress running multi-trillion-dollar deficits, Bode contends the Fed has limited ability to influence longer-term Treasury yields—a key factor in corporate borrowing and mortgage rates. “I think the market got this one wrong,” he said, emphasizing that perception, rather than fundamentals, drove much of the recent selling.

Other commonly cited explanations also fall short, according to Bode. One theory blames “whales”—early bitcoin holders who acquired coins when prices were near zero—for offloading their holdings. While Bode acknowledges that large wallets have been active and some big sellers have emerged, he frames these moves as profit-taking rather than a sign of long-term weakness. “The technical skill of the early adopters and miners is something to be applauded,” he said. “That doesn’t mean that their sales (full or partial) tell us much about the future of bitcoin.”

Bode also flagged Strategy ($MSTR) as a potential source of short-term pressure. The company’s stock tumbled after bitcoin slid below the prices at which Strategy purchased many of its holdings, sparking fears that CEO Michael Saylor might be forced to sell. Bode described this risk as real but limited, likening it to when Warren Buffett buys a large stake in a company: investors like the support but worry about eventual sales. He stressed that bitcoin itself would survive such events, though prices could temporarily dip.

Another factor complicating the picture is the rise of “paper” bitcoin—financial instruments such as exchange-traded funds (ETFs) and derivatives that track the crypto asset’s price without requiring ownership of the underlying coins. While these instruments increase the effective supply available for trading, they do not alter 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 past bitcoin price drops did not consistently result in hash rate declines, and when declines did occur, they lagged months behind the price drop. He also pointed to emerging 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 critiques that bitcoin is not a “store of value.” While some argue that its volatility disqualifies it from this role, Bode points out that nearly every asset carries risk—including fiat currencies backed 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 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 key takeaway is that price swings, no matter how dramatic, are not necessarily a signal of systemic risk.

Tags

Bitcoin crash, crypto volatility, Gary Bode, hedge fund veteran, bitcoin price drop, Fed chair nomination, Kevin Warsh, interest rates, margin calls, leveraged positions, whales, early adopters, Strategy MSTR, Michael Saylor, paper bitcoin, ETFs, derivatives, bitcoin mining, hash rate, energy prices, small modular nuclear reactors, solar-powered AI data centers, store of value, fiat currencies, long-term returns, crypto fundamentals, systemic risk, crypto market analysis

Viral Sentences

Bitcoin’s 50% plunge is a feature, not a bug, says hedge fund veteran Gary Bode.
80% to 90% drawdowns are common in bitcoin’s history—volatility is the price of admission.
The market got it wrong on Warsh’s Fed nomination, says Bode—perception, not fundamentals, drove the selloff.
Whales are taking profits, not fleeing—early adopters’ sales don’t signal bitcoin’s demise.
Strategy’s stock slide sparks fears of forced bitcoin sales, but Bode says the impact is limited.
Paper bitcoin ETFs may sway short-term prices, but the 21 million coin cap is the real anchor.
Rising energy prices won’t kill bitcoin mining—new tech like small modular reactors is on the horizon.
Bitcoin’s volatility doesn’t disqualify it as a store of value—every asset carries risk, including fiat.
Bitcoin is permissionless and requires no trust in a counterparty—that’s its ultimate value proposition.
Price swings are not a signal of systemic risk—those who stomach the volatility are rewarded long-term.

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