Bitcoin Pricing Mechanism Fails: How to Find Direction Amid Conflicting Market Narratives?

Bitcoin is currently facing an identity crisis. According to the latest market data, Bitcoin experienced intense volatility on February 6, with a low of $59,800, while just a few days prior, BTC was trading above $76,000.

This extreme fluctuation is not merely a market correction but a reflection of deeper contradictions—Bitcoin is simultaneously assigned four conflicting identities: tech growth stock, digital gold, inflation hedge, and institutional reserve asset.

The Identity Puzzle: Four Narratives in Conflict

The Bitcoin market has fallen into a state of cognitive confusion. This chaos stems from its simultaneous role in four mutually contradictory functions, each demanding different price behaviors and valuation logic.

As a “tech growth stock,” Bitcoin was once seen as a “leveraged Nasdaq index,” with its price highly correlated with tech stocks. However, the correction in early 2026 broke this link. Tech stocks, supported by the AI wave, remained resilient, while Bitcoin continued to decline.

When viewed as “digital gold,” Bitcoin should have exhibited safe-haven properties during market turbulence. But the reality disappointed: during escalating geopolitical tensions, investors turned to traditional gold, and the correlation between Bitcoin and gold even turned negative in 2026.

Market Performance: Contradictions Behind the Data

Market data from early February reveal the inherent contradictions in Bitcoin’s pricing mechanism. According to the latest Gate market data, as of February 6, the lowest price touched $60,074.80, closing at $65,848.13.

This volatility is not an isolated event. Within just 48 hours in early February, the total liquidation across the global crypto market exceeded $2.58 billion, with Bitcoin’s price retracing over 41% from its all-time high.

Structural changes in the market are even more noteworthy. For a long time, the crypto market maintained a high correlation with the Nasdaq index, but during the early 2026 correction, their trajectories diverged significantly. This indicates that the market is reassessing the attributes of crypto assets—its independent pricing power as a “tech asset” is weakening, while its commodity-like qualities influenced by macro liquidity are strengthening.

Pricing Failure: When Mechanisms Face Multiple Challenges

Bitcoin’s pricing mechanism is under unprecedented pressure. The confusion over its identity directly leads to the breakdown of valuation frameworks.

If Bitcoin is an inflation hedge, based on gold’s performance under similar monetary conditions, its price should be in the $120,000 to $150,000 range. If viewed as a tech stock, given its correlation with Nasdaq and lack of cash flow, its fair value might be between $50,000 and $70,000.

However, the current price level of around $65,000 does not satisfy any of these frameworks, placing it in an awkward middle ground that neither favors any model nor validates any argument. This is not a market seeking equilibrium but a market unable to reach consensus on its valuation.

Correlation Paradox: From Independent Asset to Risk Shadow

The shift in correlation between Bitcoin and US stocks reveals deeper issues. This correlation has soared from 0.15 in 2021 to 0.75 in January 2026.

More damaging is the correlation between Bitcoin’s volatility and stock market volatility. The correlation between Bitcoin’s volatility and the VIX index reached a historic high of 0.88 in January 2026. This “volatility homogenization” means Bitcoin has lost its independent price discovery ability.

This change in correlation is not driven by Bitcoin’s fundamentals or adoption rate but by institutional risk management models. When institutions cannot classify an asset, they default to risk models based on historical correlations.

Leverage Liquidations and Liquidity Gaps: Microstructure Collapse

The fragility of market microstructure was fully exposed during the early 2026 correction. In just 48 hours in early February, total liquidations across the network exceeded $2.58 billion.

The “1011 Event” on October 11, 2025, had already planted the seeds of risk. Multiple market makers suffered asset losses, significantly reducing their market-making capacity, which directly led to the current market’s lack of resilience. When gold prices triggered the first wave of sell-offs, the market lacked sufficient depth from market makers, causing prices to plummet through support levels and creating a liquidity vacuum.

Data shows that institutions like BitMine and Trend Research hold large ETH positions, with BitMine’s holdings exceeding 4.28 million ETH, with unrealized losses expanding. These high-leverage positions, openly held, became targets for directional short pressure in the downtrend.

Future Paths: Four Possible Solutions

Faced with this breakdown of the pricing mechanism, the market may seek solutions through one of four paths.

The first is the Strategic Reserve Path: governments and corporations treat Bitcoin like gold reserves—buy and hold forever, making price fluctuations irrelevant. Institutions cease trading Bitcoin and start hoarding it. This path could push the price to $120,000–$150,000 by year-end.

The second is the Normalization of Risk Assets: institutions officially categorize Bitcoin as a commodity derivative or a stock-like asset, accepting that Bitcoin is not a hedge but a leveraged bet on monetary expansion. Prices might trade between $80,000 and $110,000, with reduced volatility.

The third is the Inflation Hedge Acceptance Path: the market agrees that Bitcoin responds to currency devaluation rather than consumer prices. Its correlation with stocks drops to 0.3–0.4, and Bitcoin becomes a true alternative to gold. This could push prices to $110,000–$140,000.

The fourth is the Utility Value Path: the market completely ignores macro narratives and views Bitcoin solely as a payment network or value transfer layer. Prices are driven by transaction volume, adoption, and network effects, decoupled from macro markets.

At the Gate platform, we have witnessed the rapid evolution of market narratives. Currently, Bitcoin carries too many conflicting expectations—both as a safe-haven asset and a risk asset, both as a tech stock and as digital gold.

Ultimately, the market will choose among these narratives. Regardless of the path taken, Bitcoin will not disappear, but its price determination mechanism and market role will be entirely different from what we know today.

The failure of Bitcoin’s pricing mechanism is, in fact, an inevitable pain point in the market’s maturation process. As the tech premium is stripped away, the cryptocurrency market is shifting from its wild frontier days of trying to build a parallel financial system to a more pragmatic phase of integration with traditional finance.

During this transition, investors need to focus more on the actual value backing assets rather than market narratives. Whether as a store of value, a settlement network, or a financial infrastructure, the core value of blockchain technology—using technological innovation to improve financial efficiency—will become clearer after the market reshuffles.