Bitcoin's Drawdown: Is History on Its Side?

Bitcoin's recent 53% peak-to-trough drawdown has left investors wondering if this is a permanent downturn. However, according to CoinShares' research, every previous drawdown of this depth has resolved in full, with bitcoin eventually making new highs.

The historical record shows that no cycle downturn has proven permanent yet. This suggests that even though the current drop may seem severe, it's not necessarily a cause for long-term concern.

But what happens to a portfolio when you add a 5% sleeve of bitcoin? CoinShares' models show that this can actually increase returns while keeping volatility essentially unchanged. In fact, adding a rebalanced 5% bitcoin sleeve produced 8.2% annualized returns and a Sharpe ratio of 0.67, based on models established from January 2020 to June 2026.

Bitcoin is currently trading at or just below its 200-week moving average, which has been tested six times before. In each previous instance, bitcoin was higher a year later. However, it's essential to note that the sample size of five episodes across eleven years is limited, and each sat in a different market structure.

Ultimately, whether or not bitcoin will continue to fall depends on position size and an investor's view on the asset over a full cycle. As CoinShares' research shows, even with significant drawdowns, adding a 5% sleeve of bitcoin can have benefits for portfolios.