Bitcoin’s Next Crash May Be Less Severe

BloFin CEO Matt Hu stated that Bitcoin’s future market crashes could become less severe than previous cycles due to a shift in the asset’s ownership base toward institutional investors with longer investment horizons. Hu made these remarks at TOKEN2049 in Singapore, noting that the entry of ETFs and corporate treasuries is altering the dynamics of panic selling during downturns.

Stable ETF Holdings Amid Volatility

Hu emphasized that the total amount of Bitcoin held by US spot ETFs has remained broadly stable during the current bear market, despite daily fluctuations in inflows and outflows. BloFin Research estimated that these funds held approximately 1.3 million BTC on October 20, a figure that has remained largely unchanged since the end of January. This stability suggests that long-term capital is not exiting the market in response to short-term price movements.

The current bear market has seen Bitcoin decline by 53% from its peak, a drop significantly smaller than the 77% to 85% crashes observed in previous cycles. However, this comparison assumes that the recent market bottom has been established. Bitcoin slipped below $80,000 over the weekend of October 18-19, and US spot ETFs recorded $635.6 million in net outflows on October 22, the largest single-day outflow since June 25. This occurred after three sessions that attracted more than $1 billion in inflows.

Glassnode estimates that ETF investors have an average acquisition cost near $81,500, while Bitcoin treasury companies have an average cost near $80,200. Sustained weakness below these levels would put both groups at an average loss, potentially testing their willingness to hold. Hu identified specific conditions that would invalidate BloFin’s current outlook: a sustained decline in ETF Bitcoin holdings, widespread forced selling by treasury companies, and a shrinking long-term holder base as measured by on-chain metrics.

Macro Factors and Altcoin Outlook

Current financial conditions are working against immediate Bitcoin rallies. The US 10-year Treasury yield ended October 23 near 5%, while Brent crude climbed above $116 a barrel. Higher energy costs threaten to keep inflation elevated, limiting the Federal Reserve’s ability to ease monetary policy. Inflation-protected 10-year US government bonds are yielding around 2.6%, making Bitcoin, which generates no income, less attractive to investors seeking predictable returns compared to fixed-income assets.

Hu argued that rising government debt could eventually act as a catalyst for Bitcoin. As government borrowing costs climb, fiscal sustainability may take priority in policy decisions, leading to financial repression. In this scenario, central banks might maintain interest rates below inflation or purchase government bonds to suppress yields. Bondholders would receive high nominal yields, but inflation would erode their real returns, potentially driving investors toward assets with limited supply like Bitcoin.

Regarding altcoins, Hu expressed skepticism about a return to traditional “altseason” patterns. He noted that the altcoin market faces structural changes, with tokenized stocks and real-world assets competing for speculative capital. Companies with strong earnings and cash flows may attract capital that previously flowed into low-quality altcoins. CoinGecko’s third-quarter report showed spot trading volumes falling 14.2% while perpetual futures open interest increased 40.6%, indicating that leverage is growing faster than underlying trading activity. Hu believes the traditional altseason pattern may fail if liquidity remains fragmented and tokenized assets offer investors better choices.

The Federal Reserve has a policy decision scheduled for October 28. Coinbase estimates that ETFs have attracted approximately $6.4 billion in net Bitcoin investment since August, compared with $1.5 billion purchased by corporate treasuries. Whether these inflows continue will determine the sustainability of the next recovery.