Bitcoin's 26% Correction Pales Compared to 70% Drawdowns of Past Crises

Bitcoin has demonstrated a significant level of resilience during the recent market volatility, indicating a stronger capital base supporting the asset, according to Bernstein. Previous crises, such as the pandemic and rate shocks, led to drawdowns of up to 70%. In contrast, the current correction of 26% appears relatively modest. Gautam Chhugani, senior digital assets analyst at Bernstein, attributes this price stability to Bitcoin being backed by more resilient capital.

Institutional inflows through exchange-traded funds (ETFs) and corporate treasury strategies have transformed Bitcoin’s investor base, reducing its historical reliance on retail flows. Chhugani notes that ETF outflows remain in positive territory at year-to-date (YTD) ~$770mn inflows, even with Bitcoin down 15% over that period. This stands in contrast to historical periods dominated by retail panic selling and heavily leveraged miner liquidations, during which the world’s leading cryptocurrency declined up to 70%.

Chhugani sees Bitcoin increasingly behaving like a “probabilistic ‘gold’,” describing it as a higher-volatility and more liquid version of the precious metal. Despite its continued correlation with tech stocks during risk-off events, Bitcoin’s role as a weekend barometer for risk appetite is also taking shape, acting as a leading indicator when traditional equity markets are closed. “We believe, Bitcoin acts as the most accessible and liquid risk-market, when equity markets are shut down,” Chuggani said.

Miners are also contributing to this more stable backdrop. Companies have grown their hash rates substantially through 2024 and into this year. Miners have maintained “healthy balance sheets with low leverage,” and are under no immediate pressure to sell their Bitcoin holdings, further insulating the market from supply shocks. The report highlights the impact of U.S. tariffs on Chinese mining hardware, which may hinder domestic hashrate expansion. However, it also points to diversification efforts by miners and new AI-focused deals as cushioning factors. “AI offers upside and business model diversification to miners,” the analysts wrote, citing continued deal activity with firms.