Digital gold, future payment, speculative choice? The "narrative" of Bitcoin is collapsing one by one at the "peak of faith".

Bitcoin is facing an unprecedented identity crisis. The world's largest cryptocurrency has dropped over 40% from its peak, but the real problem is not the price itself, but the core narrative that supports its value is simultaneously crumbling. When "digital gold" loses to real gold, payment functionality loses to stablecoins, and speculation heat loses to prediction markets, Bitcoin is forced to face a question that has never needed answering before: why does it exist? Ironically, this crisis comes after Bitcoin has obtained everything it wanted. Washington's regulatory attitude has never been friendlier, institutions have never been more involved, and Wall Street has never been more accepting. However, these victories did not prevent the market cap from evaporating over $1 trillion. The conventional rebound script has failed - bottom-buyers have disappeared, and the forces that would usually drive a rebound are now operating in reverse. According to Bloomberg, unlike stocks or commodities, Bitcoin lacks fundamental support, and its value almost entirely relies on belief - on the narratives that persuade new buyers to enter. These narratives are now shaking. Retail investors who bought in during the Trump-induced bull market are now deeply trapped. More importantly, Bitcoin now has to compete with more alternatives, which are "easier to understand and easier to explain to trustees, clients, and boards." Portfolio manager Owen Lamont of Acadian Asset Management said: The core story of Bitcoin was "price rising," but we don't have that now, we have "price falling," and this is not a good story. The complete failure of the payment battlefield A clear signal emerged in November last year. Jack Dorsey, one of Bitcoin's most outspoken corporate advocates for years, announced that his Cash App will start supporting stablecoins. For years, Dorsey has viewed Bitcoin minimalism as a creed, and his shift signaled that the payment competition had shifted. Stablecoins have become the focus in Washington. The bipartisan-supported Genius Act easily passed, and regulatory agencies openly encourage token infrastructure that supports the US dollar. Even within the cryptocurrency industry, Bitcoin is no longer the sole focus. Tokenization, blockchain-driven derivatives, and cross-border stablecoin payments are becoming credible use cases - none of which require Bitcoin's involvement. "If there's any relationship, stablecoin activity may be related to activities on Ethereum or other chains. Stablecoins are for payments," said Carlos Domingo, co-founder and CEO of tokenization platform Securitize, "I don't think anyone today considers Bitcoin a payment mechanism." The bankruptcy of the "digital gold" narrative Even after years of hype as "digital gold," Bitcoin has yet to pass the most crucial macro test. Despite geopolitical tensions and a continuing weak dollar, gold and silver have experienced volatility rebounds this year, while cryptocurrencies have only dropped. Fund flows confirm this segmentation. According to Bloomberg data, in the past three months, US-listed gold and gold-themed ETFs have attracted over $16 billion in fund flows, while spot Bitcoin ETFs have experienced about $3.3 billion in outflows. Bitcoin's market cap has shrunk by over $1 trillion. "People are realizing that Bitcoin is what it has always been - just a speculative asset," said Tom Essaye, president and founder of Sevens Report and former Merrill Lynch trader, "Bitcoin won't replace gold, it's not digital gold, it doesn't do the same things, it can't provide the utility gold provides. It's not an inflation hedge - frankly, there are better hedge tools, you don't have to worry about volatility. It's also not a chaos hedge." The digital asset treasury model was supposed to be Bitcoin's corporate identity. Companies like MicroStrategy hoarded Bitcoin during the bull market and issued stocks based on it, creating a self-reinforcing cycle that artificially created billions of dollars in market value and provided institutional investors with a way to express confidence without direct exposure to the asset. This worked for a while. But now the cycle has reversed - along with it, the credibility of this model has collapsed. The largest digital asset treasury companies have plummeted in the past year - some even more than Bitcoin itself. Many companies are now trading below the value of the assets they hold. Speculation heat shifts to prediction markets Bitcoin's control over the speculation culture is also slipping. Prediction platforms like Polymarket and Kalshi - with binary outcomes, quick settlements, and real-world implications - have become the new playground for dopamine hunters who once chased meme coins. This is not a fringe phenomenon: Polymarket's weekly nominal trading volume has skyrocketed over the past year. Even Coinbase Global Inc. has added prediction contracts. The dopamine hasn't disappeared, it has just shifted battlegrounds. "The prediction market is becoming the next hot trend for DIY investors who like the speculative nature of cryptocurrencies," said Roxanna Islam, industry research director at ETF company TMX VettaFi, "this may mean a decrease in overall interest in cryptocurrencies." However, she added, "this could also mean a shift to longer-term, more serious investors." Furthermore, there is an increasingly widening mismatch between the accessibility and trading methods of Bitcoin. Spot ETFs have made buying Bitcoin easy, but the price of Bitcoin is still influenced by offshore derivative markets, where traders often use 100x leverage. These venues use automatic liquidation engines: when positions exceed margin thresholds, they are forcibly closed and sold into the order book, triggering a chain liquidation that can cause a collapse in spot prices in a matter of minutes. The October 2021 crash fully exposed this mechanism, with billions of dollars in leveraged positions being liquidated in moments. The discrepancy between resilience and relevance All of this does not mean that Bitcoin has ended. It is still the most liquid digital asset, with a deeper order book and broader exchange coverage than any competitor. Spot ETFs have made Bitcoin a permanent fixture in portfolios. More importantly, it has survived crises: Mt. Gox collapse, the 2022 crash - and many other crises. Each time, the network has survived and prices have started to set new records. Resilience is not meaningless. "There will always be fear, uncertainty, and doubt. There will always be questions," said Dan Morehead, founder of Pantera Capital, "I just think that those who are skeptical of how important mobile-based currencies are to the world naturally hope to find new points of concern." The bullish reasons are not that Bitcoin's narrative is flawless, but that they don't need to be - they just need to be durable enough to withstand each successive crisis of confidence. So far, history is on their side. According to Bloomberg data, Bitcoin has rebounded after multiple large declines in the past. However, history also shows that survival and relevance are not the same. Bitcoin's biggest threat is not competitors - it's drift. When no single narrative can hold, a slow erosion of attention, capital, and belief follows. The asset remains, the network continues to operate, but the stories that gave Bitcoin gravity - digital gold, free currency, institutional reserve - are all simultaneously crumbling. Whether this is a temporary crisis or a permanent transformation is one of the biggest questions of the digital economy era. "For many people, this is like a religion, and religious beliefs are hard to shake," said Michael Rosen, Chief Investment Officer of Angeles Investment Advisors, "but this is not my religion." This article is from Wall Street Seen, edited by Chen Yufeng.