Bitcoin’s sharp decline — nearly 50% from its all-time highs reached just months ago — has reignited debate over the cryptocurrency’s stability, but hedge fund veteran Gary Bode says the selloff is a feature of the asset’s inherent volatility rather than a sign of a broader crisis.

In a post on X, Bode noted that while the recent price drop is “unpleasant and jarring,” it is not unusual in bitcoin’s history. “80% - 90% drawdowns are common,” he said. “Those who have been willing to stomach the always-temporary volatility have been well-rewarded with incredible long-term returns.”

Much of the recent turbulence, he said, can be traced to market reactions to the nomination of Kevin Warsh to succeed Jerome Powell as Federal Reserve chair. Investors interpreted the move as a signal that the Fed might adopt a hawkish stance, raising interest rates and making zero-yield assets such as bitcoin, gold, and silver relatively less attractive. Margin calls on leveraged positions amplified the decline, causing a cascade of forced selling.

Bode, however, disputes the market’s interpretation. He pointed to Warsh’s public statements supporting lower rates and notes from President Trump suggesting Warsh promised a lower fed funds rate. Combined with Congress’ ongoing multi-trillion-dollar deficits, Bode argued, the Fed has limited ability to influence longer-term Treasury yields — a key factor in corporate borrowing and mortgage rates. “I think the market got this one wrong” he said, emphasizing that perception, rather than fundamentals, drove much of the recent selling.

Other commonly cited explanations, he said, also fail to tell the full story. One theory is that “whales” — early bitcoin holders who mined or purchased coins when prices were near zero — are offloading holdings. While Bode acknowledges that large wallets have been active and some big sellers have emerged, he frames these moves as profit-taking rather than an indication of long-term weakness. “The technical skill of the early adopters and miners is something to be applauded,” he said. “That doesn’t mean that their sales (full or partial) tell us much about the future of bitcoin.”

Bode also flagged Strategy ($MSTR) as a potential source of short-term pressure. The company’s stock fell after bitcoin slid below the prices at which Strategy purchased many of its holdings, prompting fears that Saylor might sell. Bode described this risk as real but limited, comparing it to when Warren Buffett buys a large stake in a company: investors like the support but worry about eventual sales. He stressed that bitcoin itself would survive such events, though prices could temporarily dip.

Another factor is the rise of “paper” bitcoin — financial instruments such as exchange-traded funds (ETFs) and derivatives that track the crypto asset’s price without requiring ownership of the underlying coins. While these instruments increase the effective supply available for trading, they do not alter bitcoin’s hard cap of 21 million coins, which Bode said remains a crucial anchor for long-term value. He drew parallels to the silver market, where increased paper trading initially suppresses prices until physical demand pushes them higher.

Some analysts have suggested that rising energy prices could hurt bitcoin mining and reduce the network’s hash rate, potentially lowering long-term prices. Bode calls this theory overblown.

Historical data shows that past bitcoin price drops did not consistently result in hash rate declines, and when declines did occur, they lagged months behind the price drop.

He also pointed to emerging energy technologies — including small modular nuclear reactors and solar-powered AI data centers — that could provide low-cost power for mining in the future.

Bode also addressed critiques that bitcoin is not a “store of value.” While some argue that its volatility disqualifies it from this role, Bode points out that nearly every asset carries risk — including fiat currencies backed by heavily indebted governments. “[...] Gold does require energy to secure unless you’re comfortable leaving it on your front porch,” he said. “Paper Bitcoin can influence the short-term price, but long-term, there are 21MM coins that will be issued and if you want to own Bitcoin, that’s the real asset. Bitcoin is permissionless and requires no trust in a counterparty.”

Ultimately, Bode’s assessment frames the recent decline as a natural consequence of bitcoin’s design. Volatility is part of the game and those willing to endure it may ultimately be rewarded. For investors, the key takeaway is that price swings, no matter how dramatic, are not necessarily a signal of systemic risk.