The Scoop: A volatile Christmas for Bitcoin is just part of the journey

This column was co-written by Frank Chaparro, director of special projects at The Block, and Laura Vidiella of MNNC Group. The views expressed in this column are their own and do not reflect the opinions of their employers. 

As we head into Christmas, the crypto sector faces brutal price action—a sharp reversal from the euphoria that marked the start of December. It’s striking how quickly a 12% drawdown can unleash a wave of negative sentiment. By comparison, the 2019 bear market saw prices plunge over 50%, making these moves seem mild. Still, the juxtaposition of Bitcoin breaking $100,000 only to face a week of steady declines is disheartening.

This reversal is no surprise, though. Two key forces shaped crypto this year: macro and political uncertainty and flows. On the macro front, optimism around rate cuts helped propel bitcoin higher, especially alongside Donald Trump’s election victory. However, the Federal Reserve’s recent signal that it plans to slow rate cuts in 2025-2026 triggered a broad market correction, billions in liquidations, and major outflows from Bitcoin ETFs.

The narrative has shifted. President-elect Trump’s promise to be a pro-crypto president was buoyed by hopes for a dovish Fed. With the latter now on shaky ground, the market is adjusting.

Investors should expect these kinds of corrections. Bitcoin is still in its early stages of maturation. Spot ETFs are new, global banks haven’t fully entered the market and institutional adoption remains nascent. Volatility, while frustrating, is part of the journey.

As The Block CEO Larry Cermak pointed out on The Scoop, previous bull markets saw at least three 20% drawdowns:

“Even the [recent drawdowns] aren’t hitting 20% yet. That generally happens once or twice, sometimes three times, in bull markets. It wipes out overexposed leverage and reloads firepower for another move.”

He added, “It’s healthy to clear out overexposure. Of course, bull markets also tend to end this way.”

While Fed uncertainty will weigh on markets, political momentum offers hope for stability. Trump has floated the idea of a federal Bitcoin reserve, suggesting the U.S. needs a strategic cryptocurrency reserve to lead in digital assets. His stated goal of $150,000 Bitcoin is ambitious—and unlikely—but his stance could catalyze broader institutional engagement in 2025. Banks testing custody and hedge funds dabbling in Bitcoin might finally dive in.

Despite Bitcoin’s growing legitimacy, much of the crypto market remains volatile. Spot ETF inflows show institutional interest, but other coins still need to prove themselves. The lack of Bitcoin exposure among many traders highlights underexposure in this cycle.

As Larry noted on The Scoop: “What’s interesting is how underexposed people are to Bitcoin. You see it climbing, yet enthusiasm is absent—no celebration, no excitement on Twitter. People are massively underexposed.”

Merry Christmas, and remember: try not to stare at the charts too much.

The Block’s Frank Chaparro serves up the latest headlines, charts, trends, and views on crypto and DeFi from around The Block, Twitter, and The Scoop pod. Subscribe to The Scoop newsletter, which hits inboxes on Tuesday and Friday mornings.