Welcome to the 35th Edition of The Bitcoin Newsletter

Welcome to the first edition of the newsletter for the year. I hope you’re all doing well and starting the year grounded and clear-headed. HODLing isn’t about technical knowledge or market timing, but mental resilience, staying calm in times of perceived chaos and keeping a long-term perspective when things feel uncertain.

Moments like these are where conviction is built. They’re easy to overlook in hindsight, but they matter. And when people later say it was “luck,” remember: not everyone is willing to sit through the uncomfortable parts. This is where the work is done.

Bitcoin is once again doing what it always does: confusing expectations while following its own logic. As each cycle unfolds, new theories emerge to explain why this time will be different — why price should only go up, and why the system has matured past volatility. And yet, bitcoin continues to move to its own rhythm.

In this edition, I want to explore why bear markets are not a failure of Bitcoin, but a prerequisite for its survival. Unlike debt-based monetary systems that suppress pain and accumulate fragility, Bitcoin periodically sheds excess leverage, resets expectations, and emerges stronger. These cycles of expansion and rest are not signs of weakness — they are how resilience is built.

Understanding this dynamic is essential, especially as we approach another psychologically difficult phase. Bitcoin doesn’t break under pressure. It becomes stronger. And that is precisely why it lasts.

Best regards,

Leon

DEEP DIVE

Bitcoin Cycles: How Resilience Is Built
1. Bitcoin Moves to Its Own Rhythm

Bitcoin follows a rhythm that is fundamentally different from other asset classes. It appears to move in recognizable cycles, yet in hindsight these cycles are never as clear or predictable as they seem in the moment. Each phase only becomes truly legible in retrospect, revealing how easily patterns are overinterpreted and how quickly past lessons are forgotten.

This recurring misjudgment leads market participants to take on excessive risk. Speculation, after all, is a natural human impulse. Each cycle invites new interpretations. What this reveals more than anything else is a recurring human tendency: we forget the lessons of the past remarkably quickly.

Bitcoin is where this behavior breaks. While fiat systems can be manipulated to accommodate human greed and sustain speculation far beyond reasonable limits, Bitcoin does not allow this. When speculation becomes excessive and unproductive, price corrects sharply. This process punishes non-viable business models, sheds leverage, and forces reality back into the system. What appears as weakness is, in fact, resilience being built.

This is not randomness. It is the outcome of a system free from political incentives, central planning, and short-term stabilization efforts. Bitcoin operates according to fixed rules, not rulers.
2. Why Bear Markets Are Inevitable — and Necessary

A bear market in Bitcoin is not a sign of failure. It is an essential mechanism.

In a debt-based fiat system, excess leverage is rarely allowed to clear. When problems arise, new money is created to paper over structural flaws, pushing instability further into the future. This guarantees larger and more painful collapses later on.

Bitcoin works differently. It must periodically wash out leverage. Speculative excess, unrealistic expectations, and weak conviction are cleared through drawdowns. This process is uncomfortable, but it is precisely what prevents systemic collapse.

If bitcoin never corrected, it would face two existential risks:

1. Becoming cornered and politically manipulated, like gold and silver.
2. Accumulating fragility until the system itself breaks.

Bitcoin avoids both by resetting instead of snapping. Its cycles of expansion and contraction resemble those of an athlete preparing for competition: periods of intense exertion followed by necessary rest. Without recovery, performance collapses. With it, strength compounds.

The graphic below illustrates Bitcoin’s classic wealth transfer mechanics: downward price moves trigger capitulation from weaker hands (leveraged, short-horizon, fear-driven sellers), forcing coins into the hands of stronger accumulators (unleveraged, patient, conviction-based holders).

This self-reinforcing loop reduces future sell pressure, concentrates ownership among durable long-term participants, and builds a resilient, stabilized base ready for the next expansion phase.

Source: Joe Burnett, The Mechanics of Bitcoin Wealth Transfer, 2026

3. The Psychology of the Coming Phase

This phase is not defined by fiat drawdowns alone. The real challenge will be psychological.

We may see environments where fiat-based narratives outperform — AI-driven equities, rising gold and silver prices, or credit-fueled business models thriving. Measured against these illusions, bitcoin may appear weak, even falling when priced in gold or other inflated benchmarks.

For newer participants, this creates confusion. Why does bitcoin lag while everything else pumps? Why does the “hardest money” underperform assets fueled by fiat?

From the perspective of the Austrian School of Economics, this is exactly what we should expect. Assets tied to the fiat system rise because newly created money enters the economy through credit expansion, central bank asset purchases, and subsidized lending. Gold and silver behave as fiat assets today because their markets are cornered, financialized, and actively managed by institutions that can print money to stabilize or support prices. Equities benefit as liquidity is injected into financial markets, real estate rises as credit is extended through mortgages.

In this sense, gold functions as a reactive asset—responding to stress and uncertainty within the existing system—rather than providing a new anchor. Bitcoin, by contrast, offers an alternative foundation outside that system. And it takes time for the market to understand that.

Bitcoin does not participate in the fiat system. It cannot be printed, bailed out, or politically directed. Instead, it follows a natural process of malinvestment and correction, flushing out excess leverage and reconnecting price with real demand. In the short term, fiat-linked assets can outperform. This is where many give up. And historically, this moment of maximum psychological discomfort is exactly when bitcoin rebuilds its foundation. Over the long term, bitcoin’s absolute scarcity and fixed unit of account reassert themselves—and capital migrates back to the hardest money.

4. Why Bitcoin Must Reset ExpectationsAs Wall Street’s involvement in Bitcoin deepens, new structural forces enter the system. These forces do not replace Bitcoin’s natural cycles, but they interact with them—often amplifying both upside and downside. Leverage, derivatives, and institutional narratives introduce short-term fragility, yet paradoxically they also accelerate Bitcoin’s self-correcting process.

Traditional finance is built on the assumption that assets can be stabilized, managed, and controlled through liquidity, derivatives, and narrative coordination. When large TradFi players entered Bitcoin, many implicitly assumed the same tools would work here. They don’t. Bitcoin does not accommodate prolonged leverage. It forces expectations to reset.

Leverage and derivatives are the clearest examples. Futures and perpetual markets can magnify price moves, but they cannot suppress reality. When leverage builds too aggressively, Bitcoin responds by flushing it out. The recent sharp decline in futures open interest reflects this process: not chaos, but disciplined deleveraging. Positions are unwound, excess risk is removed, and price reconnects with genuine demand. This is not a failure of the market, it is the market functioning as designed.

Adjacent narratives add further pressure. As speculative trades weaken elsewhere, whether in AI-driven equities, credit-fueled growth models, or overextended mining strategies, capital constraints emerge. Some participants are forced to sell bitcoin not because the thesis is broken, but because leverage and financing assumptions were wrong. Bitcoin does not provide bailouts. It demands reassessment.

This is precisely why resets are necessary. Without them, bitcoin would risk becoming cornered, managed, or politically sensitive like gold, silver, real estate or other financialized assets. Instead, it repeatedly reasserts its nature: no central authority, no rescue mechanism, no permanent suppression of risk. Expectations that drift too far from reality are corrected, sometimes brutally, but always decisively.

Wall Street’s influence does not weaken Bitcoin. It stress-tests it. Each reset strips away actors who rely on control rather than conviction, leaving behind a stronger base of holders aligned with Bitcoin’s rules, not narratives. Bitcoin doesn’t adapt to institutions. Institutions are forced to adapt to Bitcoin.

That is why these phases feel uncomfortable and why they are indispensable.

5. Bitcoin as a Self-Correcting System

Bitcoin is an intelligent system, not because it thinks, but because it adapts through incentives.

Price is the outcome of subjective human action. Expectations overshoot, optimism turns into excess, and excess must be corrected. Bear markets realign valuation with reality. What remains afterward is a stronger, more informed holder base with long-term conviction.

Each cycle leaves bitcoin with:

• Higher lows
• More robust infrastructure
• A more resilient demand curve
• A higher hashrate

Over long time horizons, Bitcoin absorbs new fiat, captures monetary premium, and reflects rising productivity. Its long-term trajectory is best described by a power-law, not because it is guaranteed, but because its design continuously filters out fragility.

Bitcoin doesn’t avoid stress. It metabolizes it, this is the essence of its monetization.

6. Transition Is Disorderly, but Inevitable

The transition from fiat to Bitcoin will not be smooth. It will feel chaotic, marked by volatility, false signals, and moments when the old system appears stronger than the new. And, in the end, there will not be a single dominant system. We are moving toward a world with two parallel systems: fiat and Bitcoin.

However, the fiat system, despite likely lasting longer than many expect due to deep institutional entrenchment and the Lindy effect, is increasingly unstable. Bitcoin, meanwhile, absorbs and monetizes this volatility, arising from the tension between rapid technological progress and societal decay.

Bitcoin becomes more resilient as the surrounding system weakens, potentially acting as a pressure valve that helps mitigate severe crises and enables sovereign individuals and groups to operate freely. This process will be gradual rather than abrupt, and in hindsight it will appear inevitable.

Bear markets, therefore, should not be feared. They should be anticipated, prepared for, and embraced. They are not Bitcoin’s weakness, they are the reason it survives.

WORTH TO KNOW

Podcast and publications

I’m keeping public appearances to a minimum at the moment to focus on writing. Over the past few weeks, I’ve only participated in a single livestream. I’ll resume sharing my thoughts more actively starting at the end of April, with the Bitcoin Conference in Las Vegas.

Gary Cardone Debates: Home Ownership vs. BitcoinGary Cardone and his brother Grant, well-known real estate investors and entrepreneurs, are now avid Bitcoiners. For the second time, Gary invited me to join a discussion. This roundtable with real estate investors focused on why bitcoin may be superior to homeownership as a long-term store of value. I joined the conversation around minute 15 and contributed intermittently throughout. WATCH**Ijoma Mangold and Niko Jilch in a recent “Was Bitcoin bringt” podcast (German)**Niko Jilch and Ijoma Mangold explore Germany’s/Austria’s slow erosion of substance and Europe’s regulatory gridlock versus agile hubs like Singapore and El Salvador. They argue that prioritizing moral superiority hastens economic decline, note a pragmatic “vibe shift” in the younger generation beyond the Greta era, and emphasize genuine private property as the foundation of freedom. WATCH

Podcast Highlight: James Check on Bitcoin’s 2025 Weakness & 2026 OutlookOn-chain analyst James Check (Check on Chain) explains 2025’s underperformance via massive long-term holder selling (75% of profit-taking from aged coins), life-stage liquidations, $100K psychology, and rotations to gold/Nvidia — creating heavy headwinds despite institutional demand. For 2026, he sees sell pressure fading, demand rebounding (ETFs + Strategy’s 11% Stretch), macro tailwinds, and Bitcoin undervalued vs. other assets—positioning for upside, though near-term dips to high-60s/low-70s remain possible. WATCH

IDEAS OF INTEREST

SightBringer and Jeff Walton on Bitcoin, Computation & Money: In a world where machines increasingly mediate economic decisions, money must live inside computation. Bitcoin’s digital, self-verifying nature allows it to be modeled, priced, and settled by machines—something physical metals simply cannot do. READ

“The Mechanics of Bitcoin Wealth Transfer” graphic by Joe Burnett: illustrates how, during price declines, short-term, leveraged holders are forced to sell, while long-term, unlevered investors step in to buy. Bitcoin moves from weak to strong hands, stabilising the market.READThe COVID Response Failure: A sharp thread arguing that the failures of the COVID response are not anomalies, but the result of three structural features of modern power—features that implicate the entire system, not just a single moment in time. READ

Four Market Divergences: The Price of Uncertainty Is Rising: In his new analysis, Sam Callahan highlights four striking market divergences signaling rising global uncertainty: (1) rising term premiums in bonds even as inflation expectations fall, (2) gold decoupling from bitcoin as a traditional hedge, (3) precious metals (gold and silver) showing different performance patterns amid monetary changes, and (4) bitcoin behaving uniquely compared to both bonds and precious metals—potentially making it a stronger hedge. Together, these signals point to bitcoin standing out as a top asset in times of economic volatility and shifting monetary systems. READ

Gold/Silver Leverage Unwind: Gold crashed ~20% and silver ~30% in a single day, vaporizing trillions as over-leveraged positions—piled into by institutions and sovereigns—unwound in a brutal margin-call cascade, exposing the fragility of any asset treated as uncrashable within the fiat system. This violent deleveraging snap is textbook Austrian malinvestment: easy credit, moral hazard, and speculative excess turning supposed stability into systemic risk. READ

BlackRock’s filing for the iShares Bitcoin Premium Income ETF signals the next evolution of Bitcoin products, shifting from pure price tracking to structured yield generation via covered calls on its massive IBIT ($70B+ AUM). This underscores deepening institutional commitment to bitcoin as foundational, long-term infrastructure, monetizing volatility for income while scaling adoption. READ

Machines Will Choose Bitcoin Over Metal — And It’s Already Obvious in Hindsight: Computers favor bitcoin because its risk is far more calculable (lower standard deviation, deterministic supply, transparent volatility) than physical metals, which lack native abstraction, APIs, or digital integration. As machine-mediated capital allocation dominates, reasoning via clean curves, self-verifying math, and permissionless code, bitcoin’s computable nature makes it the superior collateral for future systems, ending the metal age when assets must “plug in” to thrive. READ

If you want to support me. Feel free. You can send me some satoshi/bitcoin.**

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Resources

SligBringer - Gold is screaming that the legacy system has no anchor READ

Leon Wankum - A bear market is inevitable READ

Photo Credit: The Law of Opposites

Disclaimer: the content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Make sure you do your own research before making any investment and be aware of your own risk tolerance. If you like to build on my thoughts, feel free, but please cite me as the source. 2026 - Leon Wankum. 

Editing and content creation by Clemens Haidinger.

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