Bitcoin is underperforming traditional assets in 2025, falling nearly 30% from its peak earlier this year. The digital currency, once hailed as a premier growth asset, is now trailing behind gold, long-term bonds, and even utility stocks, challenging its role in modern investment portfolios.
The decline has been sharp enough to push Bitcoin's price below key psychological and technical levels. On Tuesday, the price briefly fell below $90,000, a significant threshold as it represents the average entry point for investors in the recently launched spot Bitcoin exchange-traded funds (ETFs). This dip meant that, for a time, the average ETF holder was at a loss on their investment.
Key Takeaways
- Bitcoin has dropped almost 30% from its 2025 high, underperforming major asset classes like gold, bonds, and tech stocks.
- The price briefly dipped below the $90,000 level, the average purchase price for spot Bitcoin ETF investors.
- Expectations for a breakout year, fueled by new ETFs and a favorable political climate, have not materialized.
- Analysts point to a major market crash in October and broader macroeconomic pressures as key reasons for the downturn.
A Year of Unfulfilled Promises
For many market participants, 2025 was slated to be a landmark year for cryptocurrency. The combination of a pro-crypto administration in the White House and the approval of new ETFs for a wider range of tokens was expected to usher in a wave of institutional capital, cementing digital assets as a mainstream financial instrument.
Instead, the narrative has shifted dramatically. The initial euphoria that drove prices to new heights has given way to a familiar cycle of a sharp downturn followed by growing investor uncertainty. Bitcoin's performance has failed to live up to its various pitches—as an inflation hedge, a high-growth engine, or a non-correlated asset that could diversify a portfolio.
By the Numbers
Bitcoin's performance in 2025 has been notably weak compared to other market benchmarks. While the MSCI Emerging Markets Index has seen sharp gains and even the typically stable US Utilities Index has performed better, Bitcoin is on track to potentially end the year with a negative return.
The underperformance is particularly stark when compared to gold. Proponents have long dubbed Bitcoin "digital gold," but the traditional precious metal has proven to be a more resilient store of value this year. This divergence raises critical questions for fund managers who added crypto to their strategies, as its recent behavior has undermined its very purpose within a diversified portfolio.
The Scars of a Violent Correction
Market analysts are examining several factors to explain the sustained weakness. One significant event was a severe market crash on October 10th, which liquidated approximately $19 billion in leveraged positions. This event appears to have left a lasting psychological impact on the market.
"10th October is definitely a longer lasting shock to the market than it appears on the surface," said George Mandres, a senior trader at XBTO Trading. "As much as market participants will try to forget or brush it off, it will remain deeply embedded in the appetite of market-makers to provide liquidity and in market participants’ conviction and risk appetite."
This sentiment suggests that the crash not only wiped out capital but also eroded the confidence needed for a swift recovery. The hesitancy from both traders and liquidity providers has created a more fragile market environment, susceptible to further declines.
Macroeconomic Headwinds Take a Toll
Beyond crypto-specific events, broader economic factors are also at play. The asset has recently been trading in lockstep with other high-risk assets, such as technology stocks, rather than acting as an independent hedge.
Timothy Misir, head of research at digital asset analytics firm BRN, noted the influence of global market trends. "Asia printed softer growth data overnight, Chinese equities weakened, and global tech valuations retreated as investors reassessed pricing," he explained. "With liquidity conditions already thin, correlations snapped back to their high-beta defaults. Crypto traded not as a hedge, but as the most leveraged expression of macro tightening."
This behavior contradicts the argument that Bitcoin can shield investors from downturns in traditional markets. Instead, it has become a high-beta asset, amplifying moves driven by macroeconomic sentiment. This has led to growing chatter about a potential extended downturn.
"Talks of an incoming bear market are starting to ring louder and louder," commented Augustine Fan, a partner at SignalPlus.
A History of Volatility
It is important to note that Bitcoin's history is characterized by dramatic price swings. The asset has experienced numerous significant drawdowns, often followed by powerful rallies to new all-time highs. Over longer time horizons, its returns remain substantial. However, the current environment presents a fresh set of challenges for investors who entered the market near its 2025 peak.
Defensive Posturing and a Cautious Outlook
In response to the current market climate, traders are adopting a more defensive stance. Data from the options market shows a surge in demand for downside protection, with significant interest in contracts that pay out if Bitcoin's price falls to $85,000 or $80,000.
Furthermore, the probability of a return to the record high above $126,000 by the end of the year is now seen as remote. According to data from Deribit, a leading crypto options exchange, the market is pricing in less than a 5% chance of such a recovery.
As of Wednesday morning in New York, Bitcoin was trading around $91,499, down about 1% for the day but holding above the critical $90,000 support level. Some strategists believe that if this level holds, it could signal a bottoming process. Brendan Fagan, an FX Strategist, suggested that a successful defense of $90,000 "could mark the moment where the digital asset space starts leading risk sentiment higher, not lower."
For now, however, the market remains on edge. The asset that was supposed to redefine finance in 2025 is instead struggling to keep pace with the most traditional investments in the playbook.
