Introduction
On October 10, Bitcoin’s price plummeted from over USD 122,000 to below USD 112,000, a drop of approximately 8% within hours. In contrast, gold rallied to USD 2,480 per ounce, driven by massive purchases from central banks including China, India, and Turkey. These banks continue to reduce their holdings of U.S. Treasury bonds, with China’s position having fallen from over USD 1.1 trillion in 2013 to around USD 767 billion by 2025, according to U.S. Treasury data.
Stablecoins and Their Role
Meanwhile, stablecoins—cryptocurrencies pegged to traditional assets like the U.S. dollar—have reached a market capitalization of nearly USD 310 billion. Tether (USDT) and USD Coin (USDC), the two dominant issuers, account for over 90% of this total. Interestingly, both stablecoins back a significant portion of their issuance with short-term U.S. Treasury bonds, in an inverted yield curve scenario where three- or six-month instruments pay more than ten- or thirty-year bonds.
Institutional Activity and Gold Reserves
During the price drop, major institutional Bitcoin holders liquidated over USD 19 billion, just as the market anticipated another Bitcoin surge by year-end. Optimistic analysts had projected Bitcoin could reach USD 200,000 by December 2025. Simultaneously, countries like China, Norway, and the Czech Republic have been increasing their physical gold reserves, anticipating a potential revaluation.
Legislative Developments and Their Implications
In March 2025, the U.S. Congress passed the Genius Act, legislation recognizing and regulating Treasury bond-backed stablecoins, allowing their use as financial instruments within the banking system. Many experts view this regulation as a step towards a new monetary paradigm where the crypto pattern could complement or even replace the physical dollar as the axis of international transactions and gold as a store of value.
Corporate Adoption and Government Holdings
U.S. companies like MicroStrategy and BlackRock continue to expand their Bitcoin holdings. MicroStrategy owns over 641,000 BTC and recently acquired an additional 397 BTC during this bearish cycle. BlackRock manages more than 800,000 BTC through its iShares Bitcoin Trust, while the U.S. government holds around 128,000 BTC, primarily seized in legal proceedings.
Bitcoin’s Scarcity and Its Impact
We are witnessing one of the deepest monetary transformations since the abandonment of the gold standard in 1971. With a limited supply capped at 21 million units, Bitcoin has already mined over 93% (approximately 19.6 million BTC). Considering the estimated permanent loss of about 5 million coins, the effective supply may not exceed 16 million BTC by the time mining concludes around the year 2140.
Market Performance and Future Outlook
As of October’s end, Bitcoin traded around USD 109,000, a monthly decline of 3.5%, but an annual increase of 68%. The question remains whether the recent BTC value drop from USD 108,000 on November 3 to USD 104,000 (a 3.7% decrease) signifies a lasting trend or merely a transient market movement.
Conclusion
Key Questions and Answers
- Q: What caused Bitcoin’s recent price drop? A: The drop was likely due to institutional holders liquidating their Bitcoin positions, anticipating a price surge by year-end.
- Q: How have central banks and sovereign funds reacted to cryptocurrencies? A: Some central banks and sovereign funds are beginning to consider holding strategic reserves in cryptocurrencies, potentially signaling a shift towards decentralized money.
- Q: What does Bitcoin’s scarcity imply for its future? A: With over 93% of the maximum 21 million BTC already mined and an estimated permanent loss of around 5 million coins, Bitcoin’s effective supply may not exceed 16 million BTC by the time mining concludes in 2140.
