Bitcoin: Digital Gold in the Deficit Era

Over the past several months, Bitcoin has declined significantly amid macro pressures, quantum hacking fears, and speculative investors have shifting capital toward artificial intelligence stocks. After a strong rally through most of 2025, Bitcoin peaked at $126k before correcting more than 50% to a June low of $59k.

Image Source: TradingView

Although a 50% correction would be considered catastrophic for equity markets, it is quite the norm for Bitcoin. In fact, over the past decade, Bitcoin has dropped more than 50% from its all-time highs on five occasions, including the 2017-2018 bear market, the March 2020 COVID crash, the May-July 2021 correction, and the 2021-2022 FTX bear market.

Image Source: GlassNode

Despite many deep Bitcoin drawdowns, Bitcoin has recovered to make fresh all-time highs after every drawdown in its history. Below are 5 reasons this time won’t be different:

Bitcoin Technicals:

Bitcoin has several bullish technical signals occurring currently. First, Bitcoin retreated to its long-term 200-week moving average for the first time since 2023. The 200-week MA has largely contained the Bitcoin bull market since its inception and has been one of the best long-term buy zones.

Image Source: TradingView

Meanwhile, Bitcoin just spent 6+ months below its 200-day moving average for the 3^rd time in history. Getting a chance to buy Bitcoin at these levels is extremely rare in its history. The previous two instances it spent this much time below the 200-day, Bitcoin was up 39% and 115% a year later.

Bitcoin Momentum:

Analyst Caleb Franzen (@CalebFranzen) points out that last week’s Bitcoin +20% move may be a very bullish signal. Since 2018, Bitcoin’s average 6-month return is +51.3% after a 20% or more weekly move.

Image Source: Caleb Franzen

Bitcoin Shorts are Caught Offsides:

Last week’s crypto move triggered $2.73 billion in short liquidations, the largest short-liquidation event on record. That said, many traders remain offside on their shorts and will likely be forced to cover in the coming weeks.

Inflation Protection: For the first time, the U.S. federal deficit has reached $40 trillion. The U.S. government is now spending $3.8 billion on interest per day. By 2028, estimates suggest that number will swell to $5 billion. In other words, the government will be forced to print more money over the next few years and inflate the dollar. Because Bitcoin has a fixed supply, I see it as digital gold and a way to fight inflation.

Nation State Catalyst: Last Wednesday, President Trump announced that the U.S. plans to buy “sizable” amounts of Bitcoin.

Note: Investors who want to purchase Bitcoin but don’t have a Coinbase (COIN) or crypto account can buy a low-cost ETF like the iShares Bitcoin ETF (IBIT).

Bottom Line

Bitcoin’s long-term bullish thesis remains intact. Backed by historically reliable technical floors, record-setting liquidations, and mounting government debt, the current correction fits the pattern of previous cyclical bottoms

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This article originally published on Zacks Investment Research (zacks.com).

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