I have spent the last few days thinking about why bitcoin underperformed expectations in 2025. My conclusion is that multiple trends, forces, and developments came together to create the perfect storm for the digital currency to end the year lower than where it started. * Lower risk = lower return * First, bitcoin is much less risky today than at any other point in the history of the asset. No one believes the US government is going to shut bitcoin down. The government isn’t going to come and arrest bitcoin holders. There is true decentralization, including from individual retail investors to the largest financial institutions in the world. This decentralization removes the risk of a 51% attack, along with other nefarious actions that could fundamentally change the bitcoin value proposition. Bitcoin has also gone through numerous economic situations without failing or going to $0. The digital asset has dropped ~80% numerous times, weathered the COVID liquidity crisis, resisted the FTX collapse, and then survived the Federal Reserve hiking interest rates at the fastest pace in history. This proven resilience means that the risk of holding bitcoin is low. Add in the fact that many of the top financial institutions in the world are embracing the asset and it becomes very difficult to see a scenario where bitcoin “fails.” Because of this newfound conviction in bitcoin’s continued success, we should all expect a lower return moving forward. Buying bitcoin a decade ago was high risk, high reward. Buying bitcoin today is low risk, medium reward. I expect bitcoin to continue outperforming the stock market indexes over the next decade, but it won’t deliver the 80%+ compound annual growth rate that we enjoyed in the past. * Global stability is returning * Bitcoin is supposed to be a hedge against chaos and economic uncertainty. When wars break out, and citizens around the world feel it will be necessary to resist censorship and seizures, bitcoin becomes an attractive asset. However, since President Trump took office there has been more global stability than before. The Israel/Hamas conflict is over. Russia and Ukraine are closer to signing a peace deal than ever before. Iran’s nuclear capabilities have been drastically reduced. The southern border is closed. And former Venezuelan President Nicolas Maduro was removed from his country over the weekend. This “peace through strength” approach is really about the United States returning to its position atop the global world order. There are consequences for people who get out of line. Bad people understand that the US will hunt them down to capture or kill them. All of this creates less chaos and more predictable geopolitical relationships. If there is less chaos, then the chaos hedge (bitcoin) is not sought after like it would otherwise be. * Wall Street plays different games * Bitcoin was a long-only game for most of the last 15 years. Anyone with an internet connection could acquire the asset and hold it while they hoped the price went higher. Once Wall Street and the large financial institutions got involved, the game changed substantially. You can think of these changes as a way of “civilizing” bitcoin. Many of the early bitcoiners, who are more akin to cowboys, don’t want to be civilized though. They were attracted to the asymmetric returns and they loved the fact that bitcoin had a libertarian flavor to it. The more “outside the system” bitcoin was, the more these cowboys wanted to buy. Now that bitcoin is being pulled into the legacy financial system (ETFs, treasury companies, funds, options, etc), early holders of bitcoin are exiting at a higher pace than normal. Some of them are selling their bitcoin outright. Others are using complex financial structures to reduce tax burdens, including renouncing US citizenship. But ProCap Financial CIO Jeff Park points out that some OGs are intelligently using options to sell away the upside of their bitcoin exposure in exchange for yield. These covered call strategies are applying significant pressure on bitcoin’s price, which is contributing to the asset’s lack of upside movement. * Bitcoin is not the only girl at the party * Lastly, bitcoin has historically been the most popular asset available to investors seeking extreme asymmetry and volatility. If you wanted to make a lot of money, you probably wanted to have some bitcoin. Bitcoin can no longer claim that exclusive title anymore. Investors are being bombarded with artificial intelligence, prediction markets, self-driving cars, humanoid robots, rockets, drones, brain computer interfaces, nuclear energy, and many other groundbreaking technologies. This is a great time to be a risk-taker. You have a buffet of opportunities to put in your portfolio. This increased opportunity set fractures the capital, verbal conversation, and mental energy that would have been devoted to bitcoin. * Counter-argument * As I have been thinking about bitcoin’s performance last year, I did my best to argue the opposite of my view as well. The best counterargument would be gold. Gold isn’t the sexiest asset. The precious metal is supposed to be a chaos hedge as well. Gold has been part of the legacy financial system for decades. But gold had the best year in the history of the asset in 2025. So bitcoin’s price not only disappointed, but it did so while another sound money asset was putting in historic numbers. Does that mean my analysis is wrong? Not necessarily. Bitcoin is a younger, smaller asset. There are individual public companies with a larger market cap than the entire bitcoin market cap. So it wouldn’t surprise me if bitcoin’s disappointing performance is attached to the transition the asset went through over the last 18 months. Macro investor Jordi Visser has called this the “bitcoin IPO moment.” Conclusion The argument to own bitcoin has always been a version of “bitcoin is a digital, decentralized, store-of-value asset that has a finite supply and programmatic monetary policy, which can be audited by anyone at any time.” Regardless of the market conditions, or the behavior of various holder cohorts, I still believe the argument to own bitcoin is very strong. It is a substantial percentage of my personal net worth and I ended 2025 with more bitcoin than I started the year with. As the late Charlie Munger once said, “The big money is not in the buying and selling, but in the waiting.”