Key Takeaways
- • WisdomTree's director of digital assets research Dovile Silenskyte says bitcoin's roughly 50% drawdown from its peak of nearly USD 125,000 a year ago places it firmly in a bear market, though the long-term investment case remains intact.
- • Silenskyte argues bitcoin has earned a place alongside gold but has not yet proven a reliable short-term hedge against inflation or market stress, and that its price remains sensitive to liquidity, rates and risk appetite.
- • For diversified investors, Silenskyte characterises a zero crypto allocation as an active underweight, citing WisdomTree research that a 1% bitcoin position improves a 60/40 portfolio's risk-adjusted returns.
- • On regulation, Silenskyte calls the failure of the CLARITY Act in the US Senate on Sept. 15 a significant setback, while Europe advances through MiCA and Luxembourg's UCITS crypto exposure rules.
Summary
Bitcoin, the largest cryptocurrency by market capitalisation, peaked at nearly USD 125,000 a year ago, fell to about USD 63,000 in August and has since recovered to above USD 80,000, according to a Morningstar interview with Dovile Silenskyte, director of digital assets research at WisdomTree. Silenskyte says a fall of roughly 50% from the peak is a severe drawdown that puts bitcoin firmly in a bear market, and warns that calling it a midcycle correction understates the volatility. She nonetheless argues the drawdown does not invalidate the long-term investment case. The recovery into the mid-USD 80,000s, in her view, is not sufficient to confirm a new bull market.
On the question of whether bitcoin has become a store of value comparable to gold, Silenskyte says it has earned a place alongside gold, though its defensive credentials are less established. She points to a supply capped at 21 million coins and issuance that halves roughly every four years, while noting that halvings slow supply growth rather than reduce coins in circulation. She cautions that scarcity does not make bitcoin a reliable short-term inflation or stress hedge, and that it must show it can preserve purchasing power across economic environments. She names macro conditions, investment demand, selling pressure from miners and long-term holders, and leverage as the four drivers to monitor.
On flows, Silenskyte says headline spot ETP inflows and outflows need context, since strategic allocators and traders use the same products for different purposes. Cash-and-carry trades, which involve buying a physically backed crypto ETP and selling futures, can generate redemptions if price differences narrow or financing costs rise. She recommends assessing cumulative flows alongside holdings during drawdowns as stronger evidence of durable demand. She also argues that solana's low transaction costs and rapid settlement could help it capture a growing share of blockchain-based financial activity over 12 to 24 months, but cautions that network adoption does not automatically translate into token returns.
On regulation, Silenskyte describes the failure of the CLARITY Act in the US Senate on Sept. 15 as a significant setback that increases uncertainty, though agencies can continue to act under existing powers. She is cautious about claiming the outcome was already priced in. In Europe, she notes that MiCA provides a common framework for crypto-asset activities within its scope, and that Luxembourg allows UCITS funds indirect crypto exposure of up to 10% of net asset value, subject to conditions. She also cites the UK Financial Conduct Authority's permission, effective 28 September 2026, for UK UCITS and non-UCITS retail schemes to invest up to 10% of assets in eligible crypto exchange-traded notes. She cautions that fund managers must still weigh suitability, liquidity and portfolio risk.
On portfolio construction, Silenskyte says WisdomTree's analysis estimates crypto accounts for 1-2% of listed and readily tradable assets, making a zero allocation an active underweight. She emphasises that the appropriate allocation depends on investor objectives, horizon and capacity for loss, and that scheduled rebalancing or agreed allocation bands can keep exposure disciplined.
On the question of whether bitcoin has become a store of value comparable to gold, Silenskyte says it has earned a place alongside gold, though its defensive credentials are less established. She points to a supply capped at 21 million coins and issuance that halves roughly every four years, while noting that halvings slow supply growth rather than reduce coins in circulation. She cautions that scarcity does not make bitcoin a reliable short-term inflation or stress hedge, and that it must show it can preserve purchasing power across economic environments. She names macro conditions, investment demand, selling pressure from miners and long-term holders, and leverage as the four drivers to monitor.
On flows, Silenskyte says headline spot ETP inflows and outflows need context, since strategic allocators and traders use the same products for different purposes. Cash-and-carry trades, which involve buying a physically backed crypto ETP and selling futures, can generate redemptions if price differences narrow or financing costs rise. She recommends assessing cumulative flows alongside holdings during drawdowns as stronger evidence of durable demand. She also argues that solana's low transaction costs and rapid settlement could help it capture a growing share of blockchain-based financial activity over 12 to 24 months, but cautions that network adoption does not automatically translate into token returns.
On regulation, Silenskyte describes the failure of the CLARITY Act in the US Senate on Sept. 15 as a significant setback that increases uncertainty, though agencies can continue to act under existing powers. She is cautious about claiming the outcome was already priced in. In Europe, she notes that MiCA provides a common framework for crypto-asset activities within its scope, and that Luxembourg allows UCITS funds indirect crypto exposure of up to 10% of net asset value, subject to conditions. She also cites the UK Financial Conduct Authority's permission, effective 28 September 2026, for UK UCITS and non-UCITS retail schemes to invest up to 10% of assets in eligible crypto exchange-traded notes. She cautions that fund managers must still weigh suitability, liquidity and portfolio risk.
On portfolio construction, Silenskyte says WisdomTree's analysis estimates crypto accounts for 1-2% of listed and readily tradable assets, making a zero allocation an active underweight. She emphasises that the appropriate allocation depends on investor objectives, horizon and capacity for loss, and that scheduled rebalancing or agreed allocation bands can keep exposure disciplined.
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