Investors cash out, scams rise and active strategies battle to keep Bitcoin in the portfolio mix
Bitcoin got the regulatory green light and institutional buy-in this year – and still managed to underperform the stock market.
According to CNN, Bitcoin climbed to about US$126,000 in October, more than 30 percent higher than in January, before giving up all its gains and ending roughly 7 percent lower for the year, versus a 15 percent rise for the S&P 500.
That gap, despite friendlier policy and more ETF adoption, raises hard questions about how much exposure this asset class really deserves in a diversified portfolio.
The latest drawdown has been severe.
Reuters said that Bitcoin dropped as much as 36 percent from its record US$126,223 on October 6 and still trades about 30 percent below that level.
Leverage played a role early on.
As per CNN, an extreme build-up of speculative positions set the stage for an October “flash crash,” which wiped out leveraged bets and triggered cascading liquidations.
But the more persistent pressure is coming from long-term holders, not just traders.
Bloomberg reports that since early 2023, about 1.6 million coins that sat untouched for at least two years have moved, worth roughly US$140bn.
In 2025 alone, nearly US$300bn in Bitcoin dormant for more than a year has re-entered circulation.
That selling has hit a thinner market: ETF flows have turned negative, derivatives volumes have dropped and retail activity has faded, leaving more supply to land on fewer active buyers.
This has created a “slow bleed” – steady spot selling into weak liquidity – which is harder to reverse than a one-off capitulation.
Some executives told Bloomberg that many early investors are still up 1,000x–10,000x and are naturally taking profits at six-digit prices, reducing ownership concentration but also keeping pressure on the market.
At the same time, the policy and institutional backdrop looks better than ever.
CNN reports that regulators seen as hostile under the Biden administration have been replaced by a more openly pro-crypto regime under what advocates call a “crypto president.”
Congress is advancing industry-backed legislation, and institutional adoption has surged, with billions flowing into Bitcoin ETFs.
Despite that, crypto “can’t seem to find its footing” even as risk appetite remains strong in tech stocks. That suggests investors are treating crypto as a distinct risk bucket, not just another growth asset.
Confidence issues remain a drag.
Ongoing scams using crypto ATMs that have cost Americans more than US$330m this year, along with more than 30 reported “wrench attacks” – kidnappings or assaults aimed at forcing investors to surrender wallet passwords.
Cornell University economist Eswar Prasad told CNN that retail investors are caught between fear of missing out and concerns about “unsavoury aspects of crypto and its promoters,” which makes them quick to exit when conditions worsen and amplifies volatility.
He also noted that many newer investors who bought into the post-election rally after US President Donald Trump’s re-election cared more about price momentum than about the underlying ecosystem, and left just as quickly when returns soured.
The selloff has also exposed structural risks in crypto-linked equities.
According to Reuters, “Bitcoin treasury” companies such as Strategy Inc and Japan’s Metaplanet hold large amounts of crypto as corporate reserves and often raise equity or debt to buy more coins.
Their shares long traded at a premium to their Bitcoin holdings, but those premiums collapsed when prices reversed.
Strategy’s stock is down 54 percent from Bitcoin’s October peak and 63 percent from mid-July, with Metaplanet and smaller imitators also hit hard.
Lyn Alden of Lyn Alden Investment Strategy told Reuters this was “a localized bubble,” and said investors are now more cautious about overpaying for that kind of exposure.
Mining stocks have also proved fragile.
Miners such as IREN, CleanSpark, Riot and MARA Holdings, which secured cheap electricity under long-term contracts, are pivoting into AI data centres.
Matthew Sigel of VanEck told Reuters these names benefited from two themes – Bitcoin and AI – but concerns about heavy debt and constant funding needs, combined with a weaker macro backdrop, led to sharp pullbacks.
In this environment, more investors are leaning toward active and hedged approaches rather than pure beta.
Sigel’s VanEck Onchain Economy ETF has returned 32 percentsince launching in May by underweighting overleveraged names, and he argues that active management is essential in what he calls an “immature asset class.”
On the corporate side, Reuters says activist investor Eric Jackson’s EMJ Crypto Technologies (EMJX) runs what it calls the first actively hedged digital-asset treasury, holding Bitcoin, ethereum and selected altcoins while generating yield by selling options instead of repeatedly issuing equity or debt.
The strategy is set to gain scale after SRx Health Solutions agreed to acquire EMJX, with the combined company to be led by Jackson and the ticker expected to switch to EMJX from SRXH in the first quarter of 2026.
Despite volatility, institutional anchors are deepening.
Reuters reports that Harvard University’s endowment now holds BlackRock’s iShares Bitcoin Trust as its largest publicly disclosed stock position, while sovereign wealth funds in Luxembourg, Abu Dhabi and the Czech Republic are building Bitcoin stakes.
There are also signs the current wave of long-term holder selling may be closer to the end than the beginning.
Bloomberg, citing K33 Research, says about 20 percent of Bitcoin supply has been “reactivated” over the past two years as long-held coins moved, marking the second- and third-largest such episodes in Bitcoin’s history after 2017.
K33’s Vetle Lunde told Bloomberg he expects this “OG selling” to start subsiding in 2026, allowing long-term supply to rebuild as institutional integration deepens.
