After the Bitcoin crash, we finally don't have to pretend anymore.

Author: Yuanshan Dongjian

Why would I answer the people around me like that?

Someone asked me: "What do you think about Bitcoin dropping from 120,000 to 70,000?"

I said: Finally, we don't have to pretend anymore. This is the most honest moment for Bitcoin.

• When money is printed, people say it's to hedge against inflation.
• When an ETF is approved, people say it's because it's recognized by institutions.
• When prices plummet, everyone calls them risky assets.

The narrative fell apart? Good riddance.

I often see many friends debating: Is Bitcoin a safe-haven asset or a risky asset?

• Some people cite data to say: Look, when US stocks fall, Bitcoin also falls. It's definitely a risky asset, just like the Nasdaq.
• Some people refute this with historical examples: during the 2020 pandemic and the Russia-Ukraine war, Bitcoin prices rose, which was clearly a sign of safe-haven demand.
• Some institutions even tried to smooth things over, saying that BTC is an "alternative asset" and plays a role in diversifying risk in a portfolio, blah blah blah.

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

The biggest problem with Bitcoin right now isn't "what it is," but rather that the market doesn't know what story to use to price it.

More accurately: the narratives that hyped up BTC over the years have collapsed one after another. But this may be the healthiest sign of this crash.

Let's start from January 29th.

That day, US stocks plummeted, and risk aversion intensified. Logically, if BTC is considered "digital gold," it should at least have stabilized.

On the same day, the Federal Reserve adopted a hawkish stance. Powell's successor, Kevin Warsh, is a well-known hawk, and risk assets should have fallen.

And what was the result?

Under these two completely opposite macroeconomic conditions, BTC chose to plummet by about 7%, dropping directly from $96,000 to around $80,000.

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

• When the stock market falls, it falls along with it, like a risky asset.
• Even with a hawkish Fed stance, it still fell, just like risk assets.
• But while gold prices rise, this asset doesn't, and it doesn't seem like a safe-haven asset.

There's an interesting statistic: the correlation between BTC and the S&P 500 was quite volatile before the ETF was approved in January 2024. But after the ETF was approved? The correlation skyrocketed, and they basically moved in tandem.

There is a slight negative correlation of 0.16 between BTC and the VIX fear index, but research shows that BTC declines often precede VIX rises.

This can be understood as: BTC is both a "safe-haven asset that falls along with the stock market" and a "risky asset that falls even earlier than the stock market".

What else could this be but schizophrenia?

From $126,273 in October, it has fallen to $70,370 now, a drop of approximately 44%. Market capitalization has fallen from a peak of $2.5 trillion to approximately $1.4 trillion currently. This week saw the liquidation of approximately $200 million in leveraged positions, and ETFs have likely experienced net outflows of approximately $200 million year-to-date.

Some say this is the beginning of a "death spiral." Michael Burry (yes, the one from "The Big Short") even posted a note saying that this could be a "self-reinforcing crash" for BTC, with prices falling, companies reporting bad financial results, forcing them to sell their coins, and prices continuing to fall.

It certainly looks pretty bad. But what I want to say is: this is the most realistic moment for BTC.

Three Identities That BTC Was Packaged Over the Years

From 2017 to 2024, BTC underwent three "identity reshapings":

First time: 2017-2020, Cyberpunk's anti-government currency

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

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

But this narrative has a problem: it's too niche.

There are probably only a few hundred thousand people worldwide who can understand the spirit of cypherpunks. This narrative cannot support a market capitalization of trillions of dollars.

Second: 2020-2023, Wall Street's "Digital Gold"

During the 2020 pandemic, the Federal Reserve printed money without restraint, and institutions began to enter the market.

Michael Saylor of MicroStrategy spearheaded the buying, Grayscale created a trust, and Tesla put BTC on its balance sheet.

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

Sounds great, right?

However, in 2022, US inflation surged to 9% (a 40-year high), BTC fell by 60%, while gold remained almost flat or even rose slightly.

The narrative has fallen apart.

Third time: 2024-2025, Nasdaq technology growth stocks

In January 2024, the United States launched a BTC spot ETF, attracting giants such as BlackRock and Fidelity to enter the market.

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

But here's the problem: since it's a tech stock, it has to follow the Nasdaq.

As a result, in 2026, tech stocks corrected, and BTC fell more sharply than any other stock.

This narrative has also fallen apart.

The narrative has fallen apart, so what happens next?

BTC is now in an awkward situation: it has no narrative.

The arguments on Twitter are nothing more than trying to find a "legitimate reason" for BTC.

But have you ever considered that perhaps BTC doesn't need a fixed identity at all?

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

• 2017 reflected the fervor surrounding the "decentralized utopia".
• 2021 reflects the greed of "the printing press being turned on".
• The year 2026 reflects the confusion of "I don't know what to believe."
• This answer sounds a bit unconvincing.

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

Why is narrative collapse a good thing?

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

Institutions that rushed in in 2021 shouting "to combat inflation" are now seeing net outflows from ETFs; those who were going to leave have already done so. Retail investors who treated Bitcoin like a tech stock have also left after their leverage exploded.

Who's left?

It's those people who don't care at all what BTC "is," they just know "I believe in this stuff." You can call them stupid, but at least they're honest.

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

BTC has no cash flow, no dividends, and no rental income. Its value depends 100% on "how much the next buyer is willing to pay." It's a pure consensus game.

As long as the narrative persists, everyone can pretend to be a "rational investor."

But if the narrative falls apart, you have to admit: it was a gamble.

What are we betting on? We're betting that some people still believe.

• Third, this is neither the first nor the last time.

In 2018, BTC fell from $20,000 to $3,000, a drop of 85%. At that time, some people said "the narrative has collapsed" and "the ICO bubble has burst".

In 2022, BTC fell from $69,000 to $16,000, a drop of 77%. At that time, some people said that "the institutional narrative has failed."

But look, it's rebounded. Not because it found the "perfect narrative," but because there are always people who think: whatever it is, I just find it interesting.

Let's go back to the original question: What exactly is BTC?

Those arguing on Twitter about "risk aversion versus risk management" may have forgotten one thing:

The market is not an exam, and assets do not need a standard answer.

Does BTC not know what it is?

That's because the market itself doesn't know what it wants.

• When money was printed in 2021, people said it was to "hedge against inflation".
• When the ETF was approved in 2024, people said it was "recognized by institutions".
• When the market crashed in 2026, people called it a "risky asset".

But have you ever considered that perhaps these aren't problems with BTC itself, but rather that we're too quick to label it?

BTC is BTC.

You're happy when it goes up and upset when it goes down, isn't that enough?

Those who spend their days studying "what it is" might actually be asking:

"Can I find a reason to believe that it will continue to rise?"

But if you need a reason to believe, then you don't believe in the first place.

In conclusion

Those who tried to fool people with stories about "digital gold," "anti-inflation," and "institutional entry" have all shut up now. Those who truly remain are not so much smarter, but because they don't need any narrative at all.

Some might say: Aren't you just "paying for your faith"?

Maybe.

But I'm more inclined to believe that in a market full of uncertainty, admitting "I don't know what it is" is more honest than pretending "I do know".

Screw the narrative.

Make money when prices rise, hold on when prices fall, or run away.

This is the true picture of the crypto market.

Although this answer is a bit far-fetched, hahaha.

But at least be a little more honest than those who pretend to have the standard answer.