Bitcoin Has Crashed. Here’s What History Says Happens Next.
By Kyle Smith
27 February 2026 • 7 min read
Bitcoin hit an all-time high of over £93,000 in October 2025. Today it is trading around £50,000 – down nearly 47% in four months. Headlines are bleak. Fear is widespread. And yet, for those who understand Bitcoin’s history, this moment looks very familiar.
At Florin21 we’ve been through multiple cycles like this. We’ve seen the panic, the headlines declaring Bitcoin dead, and then – without exception – the recovery. So let’s look at what caused this crash, and what history tells us about what comes next.
Why has Bitcoin crashed?
Unlike some of the previous crashes that had a single clear villain – the FTX collapse in 2022, or the China mining ban in 2021 – we believe this correction has several contributing factors working together.
Geopolitical uncertainty.
Ongoing global conflicts and instability have added to a broader risk-off environment, with investors across all asset classes reducing exposure during periods of heightened tension. Bitcoin, despite its fundamental properties as a decentralised, borderless asset, has not been immune to this sentiment.
Macro uncertainty and US tariffs.
When the Trump administration threatened sweeping tariffs on imports from China, Canada and Mexico, investors across all risk assets moved to reduce exposure. Bitcoin was sold off sharply in response to each announcement.
Leveraged positions unwinding.
The run to the highs was partly fuelled by borrowed money. As the price fell, leveraged traders faced forced liquidations that accelerated the decline – over $1 billion (approximately £800 million) in positions wiped out in a single day at the peak of the sell-off.
Hedge funds exiting basis trades.
Institutional investors who entered Bitcoin ETFs in 2024 were largely running a simple arbitrage trade. As that spread compressed to near-zero, large funds including Brevan Howard had no financial reason to hold and reduced their positions significantly.
Profit-taking by long-term holders.
Long-term holders sold over 414,000 BTC during late 2025, locking in gains after a remarkable run and adding further downward pressure.
Crucially, none of these causes represent a fundamental problem with Bitcoin itself. The network is functioning perfectly. The supply cap remains fixed at 21 million. What has changed is sentiment – and sentiment is cyclical.
It is also worth noting that Bitcoin is currently trading with a high correlation to tech stocks – behaving more like a risk-on asset than the risk-off store of value its fundamentals suggest it should be. This is a market maturity issue. The broader investment community is yet to fully price in Bitcoin’s most powerful properties – its decentralisation, its finite supply of 21 million coins, and its censorship resistance. These are characteristics that make Bitcoin better money and one of the strongest hedges against the very instability driving markets lower right now.
As understanding of these properties deepens among institutional and retail investors, that correlation with tech stocks is likely to weaken – and Bitcoin’s role as a true safe haven asset will become more widely recognised. That transition may take time, but the direction is clear.
We have been here before. Many times.
Each time the narrative was the same: Bitcoin is finished. Each time, that narrative was wrong.
The data below tells the story.
According to BlackRock’s own research, since 2014 Bitcoin has experienced four previous drawdowns in excess of 50% – and patient investors were ultimately rewarded every single time. The current crash is the fifth. Over the 2014 to 2024 period, Bitcoin averaged a 54% annualised return, outperforming every major asset class by a wide margin. BlackRock also notes that since the launch of their iShares Bitcoin Trust ETF in January 2024, Bitcoin has already seen two other pullbacks of 25% or more – and each one was followed by a strong recovery to new highs.
Two further signals worth noting:
The Fear & Greed Index is at – Extreme Fear.
The Fear & Greed Index measures sentiment on a scale of 0 to 100. Today it sits at Extreme Fear. Every time it has reached these levels historically it has marked either a market bottom or a point very close to one – January 2019, March 2020, and the depths of the 2022 bear market were all extraordinary buying opportunities in hindsight. As Warren Buffett put it – “be fearful when others are greedy, and greedy when others are fearful.”
The RSI confirms Oversold conditions.
Bitcoin’s Relative Strength Index has fallen to levels not seen since the 2022 bear market lows. Readings at this level are historically associated with capitulation and recovery. On every prior occasion, patient buyers were rewarded within 12 months.
The combination of a near-50% drawdown, a Fear & Greed reading of 11, and a deeply oversold RSI has – without exception in Bitcoin’s history – represented a better time to be accumulating than selling.
Sentiment can reverse faster than you think.
One thing that catches people off guard is how quickly Bitcoin’s mood shifts. Since 2013, Bitcoin has recorded monthly gains of 25% or more on 29 separate occasions – roughly 2 to 3 times per year on average. In April 2019 it rose 40% in a single month. In January 2023, coming off the FTX lows, it rose 40% again. The people who miss these recoveries are almost always the same people who sold – or failed to buy – at exactly the moment the Fear & Greed Index was flashing red.
Reasons for optimism:
While the current picture is painful, there are several significant tailwinds building in the background that many investors are overlooking entirely.
Google searches for “Buy Bitcoin” are at a 5-year high.
Despite the fear dominating headlines, Google Trends data shows that searches for “buy Bitcoin” have reached their highest level in five years this February – matching levels last seen in February 2021, just before one of Bitcoin’s most significant bull runs. Even more striking, searches for “What is Bitcoin” have simultaneously hit an all-time high, suggesting an entirely new generation of first-time investors is quietly entering the market for the first time. Retail sentiment and price are currently disconnected – historically, that gap does not last long.
The US Crypto Market Structure Bill is close to becoming law.
The CLARITY Act passed the US House of Representatives in July 2025 with a strong bipartisan vote of 294 to 134. It is now working its way through the Senate, with Treasury Secretary Bessent calling for rapid passage and signalling a spring 2026 signing target. When enacted, this legislation will end years of regulatory uncertainty for Bitcoin and digital assets in the world’s largest financial market – making it significantly easier for banks, asset managers and institutions to offer Bitcoin services to clients. It is expected that this legislation will become law in 2026.
The Federal Reserve ended Quantitative Tightening December, 2025.
For over three years, the Fed was actively draining liquidity from the financial system – removing approximately $2.4 trillion since 2022. That headwind is now over. This shift is particularly relevant for Bitcoin, as improved liquidity historically supports stronger performance in risk assets. With further rate cuts expected in 2026, the monetary environment could turn increasingly supportive.
Capital may be rotating from gold and silver back into Bitcoin.
Gold had an extraordinary 2025, rising 66% as investors sought safe-haven assets amid geopolitical uncertainty. Silver surged even more dramatically. However, research from Bitwise Europe has documented a consistent lag pattern between gold and Bitcoin price increases – with gold tending to lead Bitcoin by 4 to 7 months. If that pattern holds, the capital that flooded into gold throughout 2025 could begin rotating into Bitcoin in the months ahead.
None of these catalysts come with a guaranteed timeline. But for patient, long-term investors and businesses thinking about their treasury strategy, the combination of improving regulatory clarity, a loosening monetary environment, and potential capital rotation from precious metals represents a materially different backdrop than the one Bitcoin faced during previous bear markets.
The right move is preparation, not panic.
If you hold Bitcoin and you are worried, now is the time to make sure your setup is correct. At Florin21, during periods like this we focus on four things with our clients:
Strengthen self-custody. If your Bitcoin is sitting on an exchange, it is not truly yours. Market stress is exactly when exchange failures and withdrawals freezes happen – FTX being the most painful reminder of that. Getting your Bitcoin into proper self-custody should be the first priority.
Avoid all leverage. Borrowed money and volatile markets are a dangerous combination. If you are using leverage in any form, now is the time to eliminate it. The liquidation cascades we have seen in this crash have wiped out positions that would otherwise have recovered strongly.
Tighten inheritance planning. A market downturn is a stark reminder that Bitcoin’s value needs to be protected not just for today but for future generations. If you do not have a clear, documented inheritance plan in place, this is the moment to address it.
Evaluate excess capital sitting idle. History shows clearly that drawdowns of this magnitude have consistently represented strong long-term entry points. If you have capital sitting in cash or low-yielding accounts, it is worth evaluating whether a measured, planned allocation makes sense for your situation.
At Florin21, this is exactly what we help our clients with – not speculation, but the fundamentals of holding Bitcoin securely and strategically for the long term. If you would like a no-pressure conversation about your Bitcoin position, we offer a free 30-minute consultation.
