What's Up With Bitcoin?
By John H. Robinson, Financial Planner (February 2026)
Over the past few years, I have made the case that Bitcoin has structural scarcity and has attained a sufficient network effect, including global institutional and regulatory acceptance, to be regarded as a legitimate investable asset. I have specifically suggested that Bitcoin’s characteristics may set the asset up well to serve as “disaster hedge” akin to gold. I still believe the former. The latter?...Not so much. The 45% freefall in the price of Bitcoin has made me far less sanguine about its potential as a reliable store of value.
Related Reading: Debasement Trade Explained: What you should know (The Tax Project)
I have frequently quipped that people who buy Bitcoin (and/or gold) as a hedge against existential threats to the American economy, should hope it goes down, since that would presumably signal diminishing fear levels. I do not get any sense that concerns over the outlook for economy or the competency of our political leadership have abated. Bitcoin appears to behave much more like an instrument for speculation.
What Caused the Meltdown?
The truth is no one really knows what to make of Bitcoin’s present or future an asset class. The headline of a February 6th WSJ article reads, A New Crypto Winter Is Here and Even the Biggest Bulls Aren’t Certain Why. The article posits numerous plausible causes, but offers no obvious “smoking gun.” One explanation given that seems reasonable reads as follows:
“Bitcoin’s main appeal has always been its limited supply of 21 million coins. By launching ETFs and complex derivatives, Wall Street has enabled investors to bet on the price of bitcoin without needing to buy or hold the actual coins, some analysts said.”
The only problem with this explanation is that it does not explain the timing or the suddeness of the current price plunge. Another explanation offered up, suggests that Bitcoin's price rise over th past couple of years has been driven by speculators, who have become distracted by and atteracted to other volatile assets including AI, gold, and, most recently, the prediction markets. The past few months have indeed seen increasing mainstream awareness of and enthusiasm for speculating in this space. It may not be the smoking gun, but, if I had to wager (pun intended), flows from Bitcoin to prediction trading are playing a signifcant role in the price plunge. Simply put, the speculative trading that drove Bitcoing up for the past two years, has shifted its attenion to a new shiny object.
So What Should Investors Do Who Purchase Bitcoin?
To be clear, I never recommended that anyone load up on Bitcoin. As presented in my September 2025 “Road to Perdition” article, I recommended a mix of Bitcoin ETFs, Gold, international stock index funds and world currency ETFs. I believe I adequately disclosed that Bitcoin should be regarded as a risky asset with volatility characteristics similar to a tech stock. No one I work for loaded up on Bitcoin, and I don’t think Bitcoin ETFs ever represented more than 5% of any FPH client portfolio.
Last week, “Big Short” investor Michael Burry placed a price target of $0 on Bitcoin. His thesis is that it has no intrinsic value or organic use case. The counter argument is that the paper dollar has no intrinsic value either and gold only has value because people perceive it to have value. Gold's organic use cases are limited. For its part, Bitcoin does seem to have a very real potential organic use case as a secure, easily transferrable digital store of value that is accepted globally and is relatively immune to global currency fluctuations.
In terms of BUY, HOLD, or SELL, I am recommending that clients who own Bitcoin either SELL or HOLD. The reason to sell is if you bought it as a hedge against a collpasing U.S. dollar, it is not functioning as one. I get it, and it is hard to argue against that position. The dollar has indeed been steadily weaking agaiinst foreign currencies... and yet Bitcoin is tanking. However, if you believe Bitcoin still fills a need in the global investment world, then the current "Crypto Winter "(the 6th in the O.G. of crypto's brief 15-year existence) may just be another temporary setback enroute to larger global demand.
Should Investors Who Own Bitcoin Switch to Gold?
You will not hear me making that recommendation. I am well aware that many people now view gold as invincible. So far, skyrocketing gold prices seem to be dovetailing with rising investor fears. It is clearly being viewed as disaster hedge. At the same time, consumers should realize that volatility is rarely unidirectional. Using gold as an example, it rose from $35 per ounce in 1970 to $850 per oz in 1980. From there it fell to less than $300 per oz in the early 2000s and did not touch $850 again for nearly 30 years. It was effectively a dead or losing asset for nearly 50 years! Its rise from $2,000 per oz to its recent high of $5,000 per oz has occurred since January 2024 (Source: Wikipedia). Make no mistake, goldis a volatile asset. Its current price likely incorporates a great deal of pessimism already. For investors who are still seeking a disaster hedge, gold probably still merits consideration, but I am considerably more queasy about buying it at $5,000 per oz.
These days, I am more comfortable recommending world currency ETFs, such as Invesco Currency Shares Euro Trust (FXE) or broad-basket funds like the WisdomTree Bloomberg U.S. Dollar Bearish Fund (UDN) . I believe these instruments offer protection against the debasement of the U.S. dollar and may reasonably be expected to have less downside volatility than gold or Bitcoin.
ADDENDUM
In the interest of transparency, below are links to the complete list of articles I have written about Bitcoin. I jumped on the Bitcoin bandwagon in 2024 after the SEC approved the first spot price Bitcoin ETFs. For the record, I have always regarded Bitcoin as structurally different from the rest of the cryptocurrency universe.
If you Believe we are Traveling Down the Road to Perdition, What Should you Pack in Your Travel Bag? (September 2025)
The Most Common Question: How to Invest in the Trump ERA? (Feb 2025)
My Two Cents On: The Stock Market, Interest Rates, and Disaster Hedging (Nov 2024)
Is Bitcoin A legitimate Asset Class? IMO, Yes (2024)
Financial Planning Hawaii FAQ – Do You Include Cryptocurrency in Portfolio Construction? (2024)