So bitcoin as a form of currency was designed for people who are fundamentally risk averse. The idea of bitcoin was that it was a place to store value that would not be subject to the same policy risks and panic psychologies as currencies backed by governmental entities. It was intended to be a way to opt out of periodically dysfunctional systems.
And then the financialization of bitcoin happened. Traditional financial markets players wandered into bitcoin in droves. For some of these folks, bitcoin was being used as it was intended. They wanted to diversify their holdings and use bitcoin as a cushion for when other assets went to hell.
For others, bitcoin was just another game in the casino. Folks started writing bitcoin derivatives. In theory, this sort of thing would make a market smoother. But structural Wall Street’s theories about functionality rarely ever… function.
Given how bitcoin was designed, you would expect people to flood into bitcoin in “risk-off” scenarios. But that’s not what has happened. Suddenly risk-averse investors are pulling money out in the middle of high volatility in the traditional financial markets. The vehicle for escaping the traditional financial markets has now become correlated with the traditional financial markets.
That’s a problem for bitcoin when that was supposed to be the singular thing that distinguished it from other options. Hell is other people, as they say.