Bitcoin remains one of the most controversial assets in financial markets, with passionate supporters and equally vocal critics, while continuing to deliver a highly volatile investment journey.

The world's largest cryptocurrency is currently trading about 41% below the all-time high it reached last October. While the past eight months have been disappointing for bullish investors, the current bear market is not new for Bitcoin, and history may offer some clues about what could happen next.

Why is Bitcoin struggling?

It is difficult to pinpoint the exact reasons behind Bitcoin's decline since late last year. As a decentralized digital asset, Bitcoin has no executive management team and does not release quarterly earnings reports.

The author believes several factors may have contributed to the weak performance, particularly given that Bitcoin has fallen 41% while the S&P 500 has gained roughly 13% over the same period.

Among the key factors:

* Concerns surrounding quantum computing, which could pose a future threat to Bitcoin's security. This is a risk that the Bitcoin community is well aware of.

* Selling pressure caused by investors liquidating positions following tariff decisions announced by US President Donald Trump, along with profit-taking by long-term holders.

* Persistent inflationary pressures driven by higher energy prices due to geopolitical tensions, increasing the likelihood that interest rates remain elevated for longer.

* The rapid growth of the artificial intelligence sector, which is attracting a significant share of investment capital that might otherwise have flowed into Bitcoin.

Long-term optimism remains intact

Despite its rollercoaster-like volatility, Bitcoin has rewarded patient investors over the long term.

Over the past decade, the cryptocurrency has gained more than 13,700%.

There is one key fact that Bitcoin supporters continue to emphasize: Bitcoin has repeatedly recovered and gone on to set new all-time highs.

The cryptocurrency typically follows a roughly four-year cycle tied to Bitcoin halving events, which reduce the supply of newly created coins.

The most recent halving took place in April 2024, and the market is now approximately halfway through the current cycle. During the previous three cycles, Bitcoin experienced similar declines at this stage.

What happened during the previous cycle?

Bitcoin endured one of its worst periods in 2022.

Between November 2021 and November 2022, the cryptocurrency plunged 76% from peak to trough, leading many observers to declare Bitcoin dead.

What followed, however, was remarkable:

Bitcoin surged 154% in 2023.

It then jumped another 119% in 2024.

This supports the view held by many investors that sharp declines are a normal part of Bitcoin's long-term cycle.

Why could history repeat itself?

According to the analysis, Bitcoin's core fundamentals remain unchanged:

* The network has never been successfully hacked.

* Mining power (hash rate) remains near record highs.

* The maximum supply cap of 21 million coins remains fixed.

* Innovation and development across the Bitcoin ecosystem continue.

At the same time, Bitcoin remains a global asset that is influenced by broader macroeconomic forces, including:

* Monetary and fiscal policies.

* Capital flows between countries and markets.

* The attractiveness of competing assets such as stocks, bonds, real estate, and commodities.

As a result, significant volatility is likely to remain a feature of the market, keeping some investors on the sidelines.

Conclusion

Analysts believe history shows that Bitcoin has repeatedly gone through severe downturns before returning to set new record highs.

Despite the current challenges, they argue that Bitcoin's long-term fundamentals remain strong and that the next decade could bring substantial gains if historical patterns continue to repeat.

However, this remains an investment outlook rather than a guarantee of future performance, as cryptocurrencies continue to be among the most volatile and highest-risk assets in financial markets.

Silver prices fell in European trading on Monday, extending losses for a second consecutive session under pressure from a stronger US dollar and rising global oil prices, as military tensions between the United States and Iran intensified once again.

The latest round of military attacks comes amid ongoing negotiations between Washington and Tehran aimed at ending the three-month conflict, with US President Donald Trump seeking stricter conditions related to Iran’s nuclear program.

Price Overview

• Silver prices today: Silver fell 1.7% to $74.00 per ounce, down from the opening level of $75.29, after reaching an intraday high of $76.30.

• At Friday’s settlement, silver lost 0.5%, marking its third decline in the last four sessions due to weaker demand amid rising US Treasury yields.

US dollar

The dollar index rose 0.15% on Monday as part of a recovery from a two-week low, reflecting renewed strength in the US currency against a basket of global currencies.

The advance comes amid heightened market caution and reduced risk appetite after the United States and Iran exchanged a new round of military strikes while continuing intensive negotiations aimed at ending the war and reopening the Strait of Hormuz, one of the world’s most important energy trade routes.

Global oil prices

Oil prices jumped more than 3% on Monday, rebounding from five-week lows as military tensions escalated in the Strait of Hormuz, while Israel expanded its offensive in Lebanon, reducing hopes for a ceasefire across the Middle East.

Latest developments in the Iranian war

• The United States announced strikes on Iranian military sites, and Tehran responded with an attack on an air base.

• The US military said it destroyed Iranian air defense systems, a ground control station, and two drones.

• Iran’s Revolutionary Guard announced that it had retaliated by launching an attack on a US air base.

• Reports indicated that Kuwaiti air defenses intercepted missiles and drone attacks.

• The United States and Iran remain without an agreement to end the war after Trump stated that he is not in a hurry to finalize a deal.

• The US president returned the proposed agreement draft with Iran to include “stricter” conditions related to the nuclear file, extending negotiations for several additional days.

US interest rates

• According to the CME FedWatch Tool, market pricing for a Federal Reserve rate hike in December increased from 47% to 53%.

• Markets continue to price a 99% probability that interest rates will remain unchanged at the June meeting, while the probability of a 25-basis-point rate hike stands at 1%.

• To reassess those expectations, investors are closely monitoring upcoming key US economic data releases, in addition to comments from Federal Reserve officials.

Oil prices climbed more than 3% on Monday after the United States and Iran exchanged military strikes, while Israel ordered its forces to push deeper into Lebanon as part of its confrontation with the Iran-backed Hezbollah group.

Brent crude futures rose by $2.93, or 3.2%, to $94.05 per barrel.

US West Texas Intermediate crude futures also gained $3.36, or 3.9%, to $90.72 per barrel.

Despite Monday’s gains, both benchmarks posted steep losses in May, with Brent falling around 19% and US crude declining approximately 17%.

Hopes for a US-Iran agreement fade

The rally came as renewed tensions in the Middle East reduced expectations of an imminent announcement regarding an extension of the ceasefire agreement between the United States and Iran.

Washington hosted peace talks between Israel and Lebanon on Friday, but subsequent military developments increased uncertainty surrounding the negotiations.

The United States said on Sunday that it had carried out “defensive strikes,” while Iran’s Revolutionary Guard announced on Monday that its Aerospace Force had targeted an air base used in the US attacks.

US President Donald Trump said on Friday that he would soon decide whether to approve the proposed extension of the ceasefire agreement originally announced in early April.

Lebanon and Hezbollah remain central to any agreement

The report noted that Israel will be a key party to any potential agreement, while Iran has repeatedly stressed that Hezbollah must be included in any future political or security arrangements.

A US official said Washington had proposed a plan for a “gradual de-escalation” across the region.

Growing concerns over the Strait of Hormuz

Tony Sycamore, market analyst at IG, said concerns are increasing over the presence of naval mines in the Strait of Hormuz, one of the world’s most important oil and gas shipping routes.

“Even if an agreement is reached, it will not result in a large and immediate increase in oil supplies,” Sycamore said.

An Axios reporter wrote on X on Friday that Iran had planted additional naval mines in the strait during the previous week.

Meanwhile, Iranian Foreign Ministry spokesman Esmaeil Baghaei said delays in the diplomatic process stem from a lack of trust, conflicting US positions, and continued Israeli attacks on Lebanon.

Weak Chinese economy fails to cap oil gains

Supply concerns overshadowed economic data released from China over the weekend, which showed slowing manufacturing activity and reinforced fears that the world's second-largest economy is losing momentum.

At the same time, a Reuters survey indicated that Saudi Arabia may lower its official selling prices for oil bound for Asia in July for the second consecutive month.

Goldman Sachs warns of demand risks

Goldman Sachs said weak oil demand in China and Europe represents a major risk to its oil price outlook for the fourth quarter.

The bank expects Brent crude to average around $90 per barrel, while forecasting US crude at approximately $83 per barrel.

However, Goldman Sachs noted that any additional supply disruptions from the Middle East could push prices above those forecasts.

The US dollar traded little changed on Monday after posting a modest weekly loss, as investors awaited developments in Middle East peace talks and this week’s US employment data, which could influence the future path of Federal Reserve policy.

The dollar index, which measures the US currency against a basket of six major currencies, declined last week amid expectations that the United States and Iran were moving closer to an agreement that could lead to the reopening of the Strait of Hormuz.

The closure of the key oil shipping route drove energy prices higher and worsened inflation expectations, prompting some traders to increase bets on a Federal Reserve interest rate hike later this year.

However, with no new signs of progress in the negotiations and renewed tensions between the United States and Iran over the weekend, currency markets have shifted into a wait-and-see mode.

“We are waiting to see progress in one direction or the other,” said Tommy von Brömsen, FX strategist at Handelsbanken.

He added that reopening the Strait of Hormuz and a decline in oil prices could weaken the dollar in the short term, while risk-sensitive currencies such as the Swedish krona would likely benefit.

The dollar initially gained support during the conflict due to safe-haven demand and the relatively limited impact of higher energy prices on the US economy. However, it has since surrendered part of those gains amid uncertainty surrounding the future of the conflict.

The dollar index was little changed at around 99.02 after declining 0.4% last week.

Meanwhile, the euro edged down to $1.1652, while the British pound rose 0.1% to $1.3460.

Focus shifts to the Federal Reserve

Markets are now betting that the Federal Reserve’s next move will be an interest rate hike, reversing expectations that had pointed to rate cuts before the outbreak of the Iran conflict.

The shift reflects higher energy prices and their potential impact on inflation, as well as the continued strength of the US labor market.

The US nonfarm payrolls report is due on June 5. Economists surveyed by Reuters expect the unemployment rate to remain at 4.3% and for the economy to add approximately 85,000 jobs.

In a related development, Jerome Powell, whose term as Federal Reserve Chair officially ended on May 15 but who remains a member of the Board of Governors, warned against the politicization of monetary policy.

In remarks delivered on Sunday, Powell said one reason he chose to remain on the Board was what he views as ongoing threats to the independence of the US central bank.

Several Federal Reserve officials are scheduled to speak this week, including Beth Hammack, Lorie Logan, and Mary Daly.

The Japanese yen under scrutiny

Investors are also awaiting a speech from Bank of Japan Governor Kazuo Ueda on Wednesday for clues on whether the central bank intends to proceed with an interest rate hike at its next meeting.

Although there is no full consensus within the Bank of Japan regarding the decision, sources familiar with the matter indicated that pausing the reduction of government bond purchases is gaining support among policymakers.

The Japanese yen slipped 0.1% to ¥159.45 per dollar, remaining close to the ¥160 level that previously prompted Japanese authorities to intervene in the foreign exchange market to support the currency.

“¥160 appears to be the red line for Japanese authorities,” von Brömsen said.

“I believe we will see another intervention if we approach that level again.”

The Australian dollar was little changed at $0.7179, while the New Zealand dollar fell 0.4% to $0.5969.