Bitcoin Is Down. But How Bad Is It, Really?

2025 has been a big year for Bitcoin. After starting the year below $100,000, and weathering some ups and downs due to tariff-related market volatility in the spring, the cryptocurrency surged to new all-time highs, reaching a record price of more than $125,000 in October.

And then came November, and with it, a dip below $85,000. We’re looking at the causes of the ongoing Bitcoin crash, how it compares to previous crashes, and what you can do to protect your wealth.

Some Bitcoin downturns are tied to specific events. The 2017-2018 crash, for example, was the bursting of a crypto bubble that formed amid growing public interest in cryptocurrency in the mid-late 2010s.

But the cause of the current Bitcoin crash is a little harder to pinpoint. Below are a few theories:

• Bitcoin is a risk asset: For much of its history, Bitcoin has moved in more or less the same direction as other volatile investments such as tech stocks (“risk assets,” in Wall Street parlance). With that in mind, the ongoing volatility in financial markets due to fears of inflation spikes, slower-than-expected interest rate cuts or a potential recession may be spooking many Bitcoin traders.

• Post-election bubble: Bitcoin first crossed the $100,000 mark in the weeks after President Donald Trump’s victory in the 2024 election, as investors anticipated pro-crypto policy from his incoming administration. A year later, investors may be realizing that they overestimated how much influence the White House has over crypto prices.

• Bitcoin halving cycle: Roughly every four years, Bitcoin undergoes an event called a Bitcoin halving, in which payouts for Bitcoin miners are cut in half in order to limit the total number of Bitcoins in circulation. Some people believe that crypto prices tend to rise sharply in the lead up to each Bitcoin halving, in anticipation of new constraints on the supply, and then fall in the year or two after each halving, as the euphoria wears off. The last Bitcoin halving was in 2024, and the next will be in 2028.

Below is a table of every period in the last decade in which the price of Bitcoin fell at least 20% from a previous all-time high, with peak-to-trough returns (rounded to the nearest percent) and the time from each trough until the next all-time high (rounded to the nearest month).

Source: Google Finance. Data is current as of Nov. 25, 2025, and is intended for informational purposes only.

The current crash is still on the mild side, compared to previous crashes. The tricky thing is that market bottoms, much like market tops, can only be definitively identified in hindsight.

There are a few ways investors can respond to the ongoing Bitcoin downturn. One involves mitigating its impact on your portfolio. Another, much riskier option is to try to profit from it by betting against Bitcoin. A third option — riskier than the first, but maybe less risky than the second — is to view the crash as an opportunity to buy more Bitcoin on the cheap.

Bitcoin’s volatility offers investors the chance to make a lot of money during bull markets, as we saw earlier this year. But as we’re seeing now, it can also cause investors to lose a lot of money during crashes.

With that in mind, many financial advisors caution against putting too much of your portfolio into Bitcoin. One potential rule of thumb is to limit crypto to no more than 5% of your total investments, and to diversify the rest of your portfolio across broad-market investments such as exchange-traded funds or mutual funds.

In the last few years, a variety of Bitcoin-related investment products have hit the market, some of which allow investors to bet against Bitcoin and potentially profit from its downturns. There are many different types of Bitcoin ETFs available today, including inverse ETFs that are designed to increase in price when Bitcoin falls.

If you know how to trade futures, that’s another option: Many futures brokers now offer Bitcoin futures, and traders can take a short position on those Bitcoin futures to attempt to profit from future decreases in Bitcoin’s price.

But be careful: Timing the market is a gamble. As we mentioned earlier, tops and bottoms can only be identified in hindsight. And given that Bitcoin is already down about 30% from its previous high, betting against it now may be shutting the barn door after the horse ran out.

As shown in the table above, Bitcoin has previously weathered more severe crashes than the current one. The headwinds facing Bitcoin right now are intimidating, but history indicates there’s a good chance the cryptocurrency will eventually recover.

One optimistic perspective on the current situation: Investors who buy the dip in Bitcoin now may find themselves sitting on big profits in a few years, once the storm has passed.

But this, too, requires some words of warning: There’s no way to know if we’ve seen the worst of this Bitcoin crash yet. And even if we have, Bitcoin has sometimes taken years to reach new highs after previous crashes. That’s a long time to be sitting on an unprofitable investment.

The author owned Bitcoin at the time of publication.