Bellwether Bitcoin experienced a drawdown of 36 per cent from its peak of $126,198 on October 6 to a low of $80,660 on November 21, wiping out nearly $700 billion of investors’ wealth.
The world of cryptocurrencies is reeling from a massive $1.16 trillion wealth erosion over the past 50 days. Bellwether Bitcoin experienced a drawdown of 36 per cent from its peak of $126,198 on October 6 to a low of $80,660 on November 21, wiping out nearly $700 billion of investor wealth.
This tally of $1.16 trillion comprises over a trillion dollars in value lost by top 10 cryptocurrencies and about a hundred billion in market-cap lost by a handful of crypto stocks such as Strategy Inc. of the US (Strategy, in short; formerly known as MicroStrategy Inc).
Strategy’s shares are down 67 per cent from the all-time high recorded in November 2024, reminding investors of how the stock crashed 95 per cent during the dotcom bubble.
Bitcoin has recovered over the week, on the expectation of a rate cut and a possible restart of bond purchases by the US Federal Reserve in its December policy, per experts. Hopes of the rate cut and a resultant gush of liquidity seem to have helped Bitcoin find its bottom. The irony here is that it is the same liquidity or excess money supply that it set out to fight with its limited 21 million float, is keeping it afloat. It now trades at $90,915 or down about 28 per cent from its October peak.
Other major cryptocurrencies, too, continued to tumble triggered by Bitcoin (see graphic).
Rout in crypto stocks
Crypto stocks, too, have lost as much. Stocks of Bitcoin treasury companies (a company that invests and holds Bitcoin as part of its financial assets) such as Strategy and Metaplanet (Japan) are down 51 per cent and 35 per cent, respectively. Bitcoin miners MARA Holdings and Riot Platforms are down 43 per cent and 25 per cent. Crypto exchanges Coinbase and Bullish have seen losses of 29 per cent and 37 per cent.
Strategy Inc, ETFs
Ever since the US government gave the go ahead for spot Bitcoin ETFs in January 2024, the market has been flooded with crypto ETFs. These not only include spot ETFs but also leveraged ETFs that are simply instruments of mass speculation. A leveraged ETF borrows money apart from investors’ funds to trade in cryptos. Funds that seek to deliver twice the daily returns of spot Bitcoin are the most popular. Twice the returns, twice the drawdowns too!
These apart, there are also leveraged ETFs that are exposed to Strategy, which in turn is a levered firm exposed to Bitcoin. These have more layers (of leverage) than your average pastry!
Now, what’s so special about Strategy that there are ETFs tracking its stock? Strategy is in fact a data analytics company that transformed into a Bitcoin treasury company in 2020. It raises funds, both debt and equity, against the collateral of Bitcoins. With these funds, it buys Bitcoin and bets on the long-term appreciation of the crypto. It now has 6.4 lakh Bitcoins or about 3.1 per cent of the entire Bitcoin float (about 20 million) at an average price of $74,000 (as of Q3 2025).
However, the model hinges on an unrealistic assumption that Bitcoin returns can consistently beat investors’ expected rate of returns. Volatility in Bitcoin prices rock Strategy’s shares, too. For instance, the market-cap to Bitcoin NAV ratio, which used to be about 1.7x in July 2024, is now 1.1x. This could worsen when MSCI takes a decision to exclude companies with over 50 per cent of assets invested in digital assets (Strategy is one such company), from its indices, in January.
MSTU and MSTX are two large leveraged ETFs that aim to deliver twice the daily returns of Strategy’s shares. The combined AUM of these ETFs was about $4.7 billion in December 2024. Now they have been reduced to be worth just $831 million. Crypto ETFs, together with such leveraged ones, have eliminated $72 billion of investors’ wealth since Bitcoin’s peak in October.
Gold: The real hedge
All these bring up the question: What purpose do cryptos like Bitcoin serve? Are they a store of value or are they a hedge against inflation?
With such volatility, can they really be a store of value? With such drawdowns and inflation still not reined in, have they protected investors? Apparently not. And they are nowhere close to becoming legal tender.
On the other hand, gold has done the exact opposite. In dollar terms, gold has returned 62 per cent year-to-date, while Bitcoin has delivered a negative 2.7 per cent.
What is baffling is that gold, valued at about $32 trillion globally, has attracted $43 billion of net flows into US gold ETFs, so far in 2025. Meanwhile, cryptos which are a $3-trillion asset (per CoinMarketCap), have attracted flows of an equivalent $44 billion into crypto ETFs traded on US exchanges. Makes one question the sanity of crypto bulls.
Last year same time, we had posed the question whether Bitcoin is a currency, store of value or a payments innovation. A year hence and after 16 years of Bitcoin, the question remains.
In this backdrop, India’s stance on cryptos stands in stark contrast.
Published on November 29, 2025
