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“Bitcoin is like anything else: it’s worth what people are willing to pay for it.” – Stanley Druckenmiller

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

In the world of spreadsheets, any financial model can tell you with precision what a stock or asset should be worth, but in the real world, just as the S&P 500 rarely has an ‘average’ annual return, stocks and other assets rarely trade at the price where they should trade. It doesn’t take long in the market to learn that sentiment is often just as important as fundamentals, and the last few weeks show that sentiment about what things are worth in many areas of the financial market has been shifting.

S&P 500 and Nasdaq futures are down about 0.5% with the Dow slightly weaker as a 3.4% decline in Home Depot (HD) following earnings drags on that index. The risk-off sentiment has treasury yields moving modestly lower, with the 10-year yield down to 4.10%. Crude oil is little changed but below $60 per barrel, gold is down over 1%, and Bitcoin is modestly lower after briefly breaking below $90,000 overnight (more on that below).

Asian stocks traded sharply lower in the aftermath of selling in the US yesterday. Japan and South Korea both fell over 3%, while Hong Kong was down closer to 2%, and China got off ‘easy’ with a fall of just 0.8%. The declines in Japan’s Nikkei and South Korea’s KOSPI now have those indices down over 6% from their respective highs, but Japan is still up over 22% YTD and South Korea is up over 60%, so they’re still handily outperforming the S&P 500.

Europe is also taking a defensive tone this morning as major indices in the region are all down between 1% and 2%. There’s been no real catalyst behind the move besides the overall risk-off tone across global markets.

What people are willing to pay for Bitcoin today is a lot lower now than it was six weeks ago. After hitting record highs in early October, Bitcoin prices have been in free-fall, dropping more than 27% from their highs and to their lowest level since the tariff-tantrum in April. From a technical perspective, the 50-DMA has now crossed down through the 200-DMA, indicating a shift in the trend for crypto.

More notable about the recent weakness is that prices are now on pace for just the third down year since 2015. It’s been a painful six weeks, but if there’s any consolation, “HODLers” can take some comfort that this year’s decline is nowhere nearly as steep as the 64.3% decline in 2022 and the 73.8% decline in 2018.

With a decline of around 27% from its recent high, Bitcoin’s decline has been contained, at least relatively speaking. The chart below shows Bitcoin’s historical drawdowns from record highs, and the current decline has been tame compared to the historical norms. Since 2017, on any given day, Bitcoin’s median decline from an all-time high has been 40%.

What’s notable about the recent decline is that, over the weekend, Bitcoin ended a streak of 219 days without trading in a 25% drawdown. That was the longest streak since at least 2015.

While Bitcoin’s just-ended streak without a 25% decline was historic, one could argue it’s even more overdue for a 30% decline. Through yesterday, Bitcoin has gone nearly 22 months without falling more than 30% from an all-time high, but it is getting close…