Bitcoin’s latest sell-off may leave investors wondering if they should buy now at bottom-basement prices, sell out and run for the hills or hold tight on the long-term use case.
It also revives a familiar question: What role — if any — should the world’s most widely held cryptocurrency play in your personal investment portfolio?
Bitcoin prices have fallen from a peak of more than $126,000 in October to under $64,000 as of Thursday afternoon — a drop of about 50% in just a few months.
The decline has come even after spot bitcoin exchange-traded funds launched in January 2024, a move that analysts said would bring in more investors and push prices higher. President Donald Trump’s crypto-friendly administration has also been seen as supportive for prices, analysts say.
The pullback comes amid rising geopolitical tensions, increased market volatility and signs of growing investor caution, even as the broader economy has held up.
Historically, bitcoin and other cryptocurrencies have tended to respond to periods of elevated market volatility with sharper swings than many traditional assets. Unlike stocks or bonds, crypto prices are driven largely by shifts in investor sentiment and liquidity, making them more sensitive to changes in risk appetite when markets turn cautious, according to a 2023 analysis by S&P Global Ratings.
That dynamic can amplify volatility in both directions. John Blank, chief equity strategist at Zacks Investment Research, said in a CNBC interview on Monday that bitcoin relies heavily on continued demand, which can lead prices to “explode up and down” when buyers or sellers pull back, and warned the cryptocurrency could fall as low as $40,000 if the downturn deepens.
For financial advisors, the sell-off underscores that volatility is part of owning bitcoin.
What to do with your bitcoin now
There is no single right move for bitcoin investors during or after a sell-off. Financial advisors say the decision depends on how bitcoin fits into your broader financial plan and how much volatility you can realistically tolerate. It’s also smart to consult with a trusted financial advisor before making changes to your portfolio.
Historically, bitcoin has moved in pronounced cycles, with sharp price increases often followed by steep pullbacks. While those momentum-driven surges have helped some investors generate significant gains, they have also been followed by declines of 60% or more when sentiment shifts.
“Bitcoin’s recent volatility is a reminder that crypto is still a speculative asset, not a core building block of most portfolios,” says Vered Frank, a certified financial planner and founder of StackWealth. “Big drops after periods of hype show why it’s risky to rely on bitcoin as a standalone wealth-building strategy.”
Frank advises keeping crypto a small part of a diversified portfolio. “A 1% to 5% allocation can make sense for investors with strong financial foundations and high risk tolerance,” she says. “Downturns don’t change crypto’s role, they highlight its uncertainty.”
That volatility, some advisors say, is not a flaw so much as a defining trait.
“Volatility is a feature, not a bug, with bitcoin,” says Douglas Boneparth, a certified financial planner, co-founder of Bone Fide Wealth and member of the CNBC Financial Advisor Council, who has owned bitcoin since 2014. He says bitcoin can have a place in portfolios for some investors with a higher risk tolerance, particularly those who view it as a long-term store-of-value play rather than a short-term trade.
In that view, the latest sell-off does not necessarily undermine the long-term case for owning bitcoin, Boneparth says. Bitcoin’s limited supply and independence from governments and central banks are seen as supporting its value over time, he says.
“If you went into owning bitcoin believing it was a legitimate asset class with long-term opportunity, you have to ask yourself what actually changed” with the recent drop, he says.
Unlike stocks or bonds, bitcoin does not generate income or cash flow, meaning long-term returns depend largely on price appreciation and an investor’s willingness to tolerate sharp swings. That’s why planners who are comfortable with bitcoin at all tend to treat it as a limited, high-risk investment.
That said, the latest swing is a reminder that crypto isn’t essential to a financial plan, says Frank. “For most people, crypto only makes sense as a small part of a diversified portfolio and in an amount they can afford to lose. It shouldn’t replace stocks, bonds or emergency savings,” she says.
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