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Bitcoin Is Down Again. But How Bad Is It, Really?

The ongoing Bitcoin crash is milder than some previous crashes, so far. Here’s how to protect your portfolio.

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Sam Taube writes about investing for NerdWallet. He has covered investing and financial news since earning his economics degree from the University of Maryland in 2016. Sam has previously written for Investopedia, Benzinga, Seeking Alpha, Wealth Daily and Investment U, and has worked as an editor for Investment U, Wealth Daily and Haven Investment Letter. He is based in Brooklyn, New York.

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Head of Content, Investing & Taxes

Arielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an editor. Previously, she was a researcher and reporter for leading personal finance journalist and author Jean Chatzky, a role that included developing financial education programs, interviewing subject matter experts and helping to produce television and radio segments. Arielle has appeared on the "Today" show, NBC News and ABC's "World News Tonight," and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. She is based in Charlottesville, Virginia.

2026 is not off to a great start for Bitcoin, which is down more than 20% year-to-date. This is just the latest phase of a bigger downturn that started last year; the world's largest cryptocurrency is down more than 40% from its October 2025 all-time high.

We’re looking at the causes of the ongoing Bitcoin crash, how it compares to previous crashes, and what you can do to protect your wealth.

Why is Bitcoin crashing?

Some Bitcoin downturns are tied to specific events. The 2017-2018 crash, for example, was the bursting of a crypto bubble that formed amid growing public interest in cryptocurrency in the mid-late 2010s.

But the cause of the current Bitcoin crash is a little harder to pinpoint. Below are a few theories:

Bitcoin is a risk asset: For much of its history, Bitcoin has moved in more or less the same direction as other volatile investments such as tech stocks (“risk assets,” in Wall Street parlance). With that in mind, the ongoing volatility in financial markets due to fears of inflation spikes, slower-than-expected interest rate cuts or a potential recession may be spooking many Bitcoin traders.

Post-election bubble: Bitcoin first crossed the $100,000 mark in the weeks after President Donald Trump’s victory in the 2024 election, as investors anticipated pro-crypto policy from his incoming administration. A year and some change later, investors may be realizing that they overestimated how much influence the White House has over crypto prices.

Bitcoin halving cycle: Roughly every four years, Bitcoin undergoes an event called a Bitcoin halving, in which payouts for Bitcoin miners are cut in half in order to limit the total number of Bitcoins in circulation. Some people believe that crypto prices tend to rise sharply in the lead up to each Bitcoin halving, in anticipation of new constraints on the supply, and then fall in the year or two after each halving, as the euphoria wears off. The last Bitcoin halving was in 2024, and the next will be in 2028.

List of Bitcoin crashes and recovery times

Below is a table of every period in the last decade in which the price of Bitcoin fell at least 20% from a previous all-time high, with peak-to-trough returns (rounded to the nearest percent) and the time from each trough until the next all-time high (rounded to the nearest month).

Bear market dates

Top-to-bottom loss

Next all-time high

Dec. 2017 — Dec. 2018

-83%

24 months

Mar. 2021 — Jul. 2021

-48%

4 months

Nov. 2021 — Nov. 2022

-74%

16 months

Mar. 2024 — Sep. 2024

-23%

2 months

Jan. 2025 — Apr. 2025

-20%

1 month

Oct. 2025 — present

-48% as of Feb. 6

TBD

Source: Google Finance. Data is current as of Feb. 10, 2026, and is intended for informational purposes only.

The current crash is still on the mild side, compared to previous crashes. The tricky thing is that market bottoms, much like market tops, can only be definitively identified in hindsight.

The current crash is a great example of the dangers of assuming an "all clear" too soon. After plummeting more than 30% between early October and late November 2025, Bitcoin appeared to level out for a couple of months, and even started climbing back in to the high $90,000s in mid January. But then at the end of the month, it took another tumble, briefly approaching $60,000 in early February before rebounding slightly.

How to adapt to a Bitcoin crash

There are a few ways investors can respond to the ongoing Bitcoin downturn. One involves mitigating its impact on your portfolio. Another, much riskier option is to try to profit from it by betting against Bitcoin. A third option — riskier than the first, but maybe less risky than the second — is to view the crash as an opportunity to buy more Bitcoin on the cheap.

Portfolio diversification

Bitcoin’s volatility offers investors the chance to make a lot of money during bull markets, as we saw earlier this year. But as we’re seeing now, it can also cause investors to lose a lot of money during crashes.

With that in mind, many financial advisors caution against putting too much of your portfolio into Bitcoin. One potential rule of thumb is to limit crypto to no more than 5% of your total investments, and to diversify the rest of your portfolio across broad-market investments such as exchange-traded funds or mutual funds.

» MORE: Best brokers for mutual funds

Betting against Bitcoin

In the last few years, a variety of Bitcoin-related investment products have hit the market, some of which allow investors to bet against Bitcoin and potentially profit from its downturns. There are many different types of Bitcoin ETFs available today, including inverse ETFs that are designed to increase in price when Bitcoin falls.

If you know how to trade futures, that’s another option: Many futures brokers now offer Bitcoin futures, and traders can take a short position on those Bitcoin futures to attempt to profit from future decreases in Bitcoin’s price.

» MORE: Best futures brokers

But be careful: Timing the market is a gamble. As we mentioned earlier, tops and bottoms can only be identified in hindsight. And given that Bitcoin is already down more than 40% from its previous high, betting against it now may be shutting the barn door after the horse ran out.

Buying the dip in Bitcoin

As shown in the table above, Bitcoin has previously weathered more severe crashes than the current one. The headwinds facing Bitcoin right now are intimidating, but history indicates there’s a good chance the cryptocurrency will eventually recover.

One optimistic perspective on the current situation: Investors who buy the dip in Bitcoin now may find themselves sitting on big profits in a few years, once the storm has passed.

» MORE: Best crypto exchanges

But this, too, requires some words of warning: There’s no way to know if we’ve seen the worst of this Bitcoin crash yet. And even if we have, Bitcoin has sometimes taken years to reach new highs after previous crashes. That’s a long time to be sitting on an unprofitable investment.

The author owned Bitcoin at the time of publication.

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