Bitcoin's Demise Is Inevitable

Jul 22 2025 bitcoin


Summary Bitcoin's price surge is driven by hype, institutional adoption, and favorable political shifts, not by intrinsic value or improving fundamentals. Trading volumes and active addresses are declining, indicating weakening underlying activity despite rising prices and increased derivatives speculation. Bullish arguments based on HODL trends and futures activity are double-edged, often signaling overextension and a potential bubble rather than sustainable growth. Given deteriorating fundamentals and reliance on speculation, I maintain a 'strong sell' rating on BTC-USD, expecting a significant price collapse eventually. The problem with speculative bubbles is that you can be wrong for a long time before ultimately being proven right. This will likely prove to be especially the case when it comes to those who are bearish about Bitcoin ( BTC-USD ) and many other cryptocurrencies in general. I have argued for a while now that Bitcoin is destined to collapse. This is because it lacks any intrinsic value and is centered around hype and the premise of finding a bigger fool willing to pay more than you did. Recently, Bitcoin prices have been hitting all-time highs. This has been driven by increased adoption at the institutional level, for instance, with the growth of ETFs in the space. The Trump Administration also seems more open to cryptocurrency than previous administrations, which is also fueling the hype. In the short run, there's no telling how high prices will go. Would I be surprised if they double, triple, or more? No, I wouldn't. At the end of the day, I believe that it will drop, though. And I would also argue that there is mounting evidence that the underlying fundamentals are weakening. Because of this, I have no problem maintaining Bitcoin as a ‘strong sell’ candidate. A Note on Speculative Bubbles I consider myself to be an avid reader of all things finance and economics. I am especially interested these days in the economic history of the Dutch Republic, but I digress. In recent years, one of the best financial books that I have read is Boom and Bust: A Global History of Financial Bubbles , which naturally talks about financial bubbles that have developed over the centuries. Some of these are bubbles that are household names. Others, like the British bicycle bubble, are unknown to the vast majority of society. In that book, the authors present the idea of the Bubble Triangle. Author Simply put, the Bubble Triangle represents the three elements needed in order for a speculative bubble to come into existence. These are marketability, money/credit, and speculation. Marketability refers to how easy it is to buy and sell the asset in question. Money and credit refer to how easy it is to access funds, whether because of government stimulus, broader societal wealth, or policies that make borrowing cheaper, which make it possible for the bubble to inflate. Speculation is the third and final element and refers to the idea that participants must believe that they can sell what they have purchased to somebody else at a higher price than what they paid for it. This could be a legitimate belief that the asset will appreciate based on intrinsic reasons. But often, it is rooted in the Greater Fool Theory. Even though these are the elements needed in order for a speculative bubble to come about, they almost always require fuel, or a catalyst if you will, in order to take off. Typically, this would be technology or changes in the political environment. I would argue that Bitcoin has experienced both, especially on the technology side. I firmly believe that blockchain technology is revolutionary and will play a big role in society in the long run. Bitcoin enthusiasts obviously believe that as well. Latching on to that, they have leveraged technology like easy trading around the clock, the benefits of blockchain offers, and more, to pump up Bitcoin. More recently, the political environment, at least in the US, has become more favorable to Bitcoin. In 2021, the Securities and Exchange Commission approved the first Bitcoin futures-based ETF. And in January of last year, they approved a Bitcoin spot ETF that granted investors the opportunity to buy into funds that actually held Bitcoin directly. Under the Trump Administration, the political environment has become even more favorable. In March of this year, Donald Trump signed an executive order establishing a Strategic Bitcoin Reserve that would be funded with Bitcoin seized by law enforcement. The Securities and Exchange Commission has dismissed enforcement actions against major companies such as Coinbase ( COIN ) and created a Crypto Task Force while simultaneously wiping out the National Cryptocurrency Enforcement Team in an effort to soften criminal enforcement in this space. Most recently, Trump signed the GENIUS Act , which provided significant clarity for the use of stablecoins and will certainly further their adoption. In fact, at the time that development came out, I wrote an article about Visa ( V ), wherein I talked about what it means for that business. Even though many market participants might disagree with my overall assessment of Bitcoin and cryptocurrency more generally, as I mentioned already, I am a big believer in the potential for blockchain technology. When regulated appropriately, I also believe that stablecoins offer a unique opportunity for society. But Bitcoin specifically, and other cryptocurrencies like it that are not backed by anything, are, I believe, destined to drop precipitously. I don't know if they deserve to fall to $0. However, I do think that they deserve to fall pretty close to it. The Data Isn’t Looking Good Author - Data from Glassnode Studio My pessimism regarding Bitcoin specifically has been detailed in previous articles. And the way I see it, data continues to show that the increasing prices of the cryptocurrency are occurring with lower and lower volume. In the chart above, you can see the dollar volume and the unit volume of Bitcoin over the last several years now. And in the chart below, you can see a smaller section of time from that chart covering from January of 2024 through June of 2025. Author - Data from Glassnode Studio What this data shows is that, while there have been periodic spikes in activity, the overall trend has been lower, especially over the last several months. In fact, the volume of Bitcoin transactions as measured by total units has hit its lowest level since at least September of 2020. Of course, one could argue that because prices are rising, the number of units transacted should be decreasing. But even the dollar volume of transactions is on the decline. In June of this year, the dollar volume hit $22.28 billion. You would have to go back to September of last year to find volume that was lower than this. And prior to that, you would have to go all the way back to November of 2023. Simply put, this means that prices are being propped up by ever-lower trading activity. Those who are bullish about Bitcoin could very well argue that this is because there has been a shift away from trading it for speculative purposes and toward holding it for investment purposes. There is certainly some evidence to support this view. In this space, there's something referred to as HODL, which is used to refer to those who are holding onto Bitcoin for long-term purposes. The 1-Year HODL Wave specifically refers to the percentage of Bitcoin holders, as measured by addresses or wallets, that have held their Bitcoin for at least one year without conducting any outgoing transactions. Author - Data from Bitbo The rationale here is that, if you are holding for the long term, you are treating this as a legitimate asset as opposed to something that is speculative. In the chart above, you can see the overall trend that we have seen since January of 2017; and in the chart below, you can see the data with Bitcoin prices shown on a logarithmic scale, which is what you should really focus on. Typically, as HODL decreases, Bitcoin prices rise because it means that there is additional transaction activity that, when combined with generally low volumes, pushes prices higher. Generally, it is counterintuitive that increased selling from long-term holders would cause price increases. You would typically expect the price to decline. But there are a couple of reasons why this is. Even though long-term holders are taking a profit or losing confidence in the cryptocurrency, this actually serves as a lagging indicator that drops only after coins move. The higher prices that market participants are willing to pay for Bitcoin, especially as new money from new buyers (such as from ETFs and institutions) comes in and causes a rise in demand, is really nothing more than a reflection of the hype of newcomers. Author - Data from Bitbo There are other reasons why Bitcoin prices seem to be rising. One of these relates to the fact that market participants are increasingly relying on derivatives in order to ramp up returns. According to one source , open interest for Bitcoin futures is around $42 billion today. That's down just slightly from $43 billion previously. Funding rates are also on the rise, which means that there is optimism centered around the idea of prices moving higher since a rise in funding rates means that those who are bullish about Bitcoin are willing to pay to stay with their long positions. Even though funding rates are not as high as they were about a year ago, they are still elevated by historical standards. This could imply overextension, as could be the fact that derivatives activity is at or near all-time highs. Unfortunately, a lot of the metrics relied on by those who are bullish about Bitcoin are double-edged in nature. For instance, the decline in the 1-Year HODL Wave is viewed in a bullish light because it is indicative of price increases. But at the same time, it can also be interpreted as a decline in long-term sentiment. The rise in the futures market can be viewed in a positive light because it indicates increased confidence in Bitcoin. But at the same time, it can be viewed as an overextension caused by over hype. The same can be said of funding rates. Often, what can be perceived as the investment community legitimizing a speculative asset or, in the case of Bitcoin, a faux asset, can really just be evidence that the market is reaching a breaking point. I think those who are bullish about Bitcoin would have a better argument if the number of active addresses were increasing also. But the exact opposite is occurring. Active addresses are unique wallet addresses that are involved in transactions that utilize blockchain technology for a specific window of time. In order for a wallet to be considered to have an active address, it either sends cryptocurrency or receives it during that window of time. So this is a measure of incoming and/or outgoing activity. Author - Data from Glassnode Studio In the table above, you can see monthly data through June of this year regarding active addresses. And in the chart below, you can see trailing 12-month and trailing 5-month average volumes utilizing this data. Overall activity is down. On a trailing 5-month basis, the number of active addresses is down 15.5%. And on a trailing 12-month basis, it's down 23%. This is evidence to me that overall activity in cryptocurrency continues to contract. Derivatives can only push the market so high before prices must rely on underlying fundamentals. And to me, these fundamentals look weak. Author - Data from Glassnode Studio Takeaway I have no idea how high Bitcoin prices will rise. They could grow significantly higher than where they are today. I wouldn't be surprised. At $2.35 trillion for Bitcoin on its own and $3.87 trillion for cryptocurrency in its entirety, the market cap is larger than the GDP of most countries. And all of this is for lines of code that have no intrinsic value. I believe that what many market participants are viewing as evidence of a bullish situation can be interpreted equally as evidence of a bubble that will inevitably hit a breaking point. I would probably feel differently if the overall adoption of Bitcoin as a mechanism of exchange was rising. But with overall activity declining and the market relying heavily on lower volumes and derivatives markets in order to inflate, I fear an inevitable plunge. Because of this, I remain incredibly bearish and will retain the ‘strong sell’ rating I have on it.

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