Bitcoin's Fall: Why Now Is The Time For A Contrarian-Long IBIT Play

Summary I reiterate a buy rating on iShares Bitcoin Trust ETF as technical support and deeply oversold conditions present a contrarian long opportunity. IBIT has outperformed smaller tokens in 2026 despite Bitcoin's 12% YTD decline and a 38.5% drawdown from all-time highs. Implied volatility for IBIT is expected to spike toward 60%, historically signaling near-term bottoms and potential for a bullish reversal. Seasonality favors IBIT from February through Q2, and current bearish sentiment mirrors past setups that preceded strong rallies. Bitcoin (BTC-USD) succumbed to major selling pressure shortly after last Friday’s gold rout and the outright crash in silver. Over the weekend, the world’s most valuable cryptocurrency plunged into the mid-$70,000s. Down 12% year-to-date, Bitcoin is a notable laggard in a sea of solid 2026 asset class returns. I’ll get into price action on the iShares Bitcoin Trust ETF (IBIT) in just a moment, but it often helps to frame crypto’s size relative to the global investable universe. According to WisdomTree, cryptocurrency is 1.2% of the so-called global portfolio. So, any allocation larger than that is an overweight. Remarkably, as of mid-January, gold commanded a 12% share (valued at more than $30 trillion). Today, amid significant crypto volatility, I’m revisiting IBIT. I had a buy rating back in November . Shares were precisely unchanged since my previous analysis as of last Friday’s close, but Bitcoin itself is now down more than 5% since right before Thanksgiving. Following my Q4 assessment, IBIT jumped to the mid-$50s. The $77,000 downside support spot I noted is not right in play. With support near, I reiterate a buy rating. Crypto's Weighting in the Global Market Portfolio is Near 1% WisdomTree Funds According to the issuer , IBIT enables investors to get exposure to Bitcoin through the convenience of an exchange-traded product, helping remove the operational, tax, and custody complexities of holding Bitcoin directly. A $64 billion fund, IBIT finished January with muted implied volatility. According to options data from Fidelity Investments, Bitcoin ’s “IV” was only 40%, closer to 52-week lows rather than 52-week highs. At the time of my previous write-up, we were looking at near-60% implied volatility, which indicated a near-term price trough following the auto-deleveraging (ADL) liquidation event that Fundstrat’s Tom Lee often speaks of. I expect IBIT’s IV to once again soar to begin February. Should it approach the key 60 level, a near-term bottom could once again be in play. IBIT: Watch the 60% Implied Volatility Level Fidelity Investments It has already been a horrific year for those overweight crypto. IBIT has actually outperformed smaller tokens thus far in 2026. Augur Infinity noted that Bitcoin and Ether stood out in a bad way through Saturday's close. The former was –10% for the year’s first month, while the latter was –17%. Crypto Worst Among Asset Classes/Areas YTD Augur Infinity Conditions appeared fine for IBIT when I penned my monthly market recap article last Friday afternoon. IBIT’s 8% was weak, but it was not horrific. Conditions quickly shifted just 24 hours later. My take here is that the risk-taking appetite in dollar alternatives has quickly come out of the markets. The US Dollar Index (DXY) put in a potential false breakdown technically, while chatter of the “debasement trade” seemed to reach a crescendo after the Department of Justice confirmed it would conduct a criminal investigation into Fed Chair Jerome Powell regarding his congressional testimony about the costs and details of Fed building renovations. This is a key bearish IBIT risk in the near term—if the dollar indeed claws back recent losses, crypto could see further downside pressure. What’s more, the Kevin Warsh nomination was seen as a bit of a hawkish move by bond traders last Friday, potentially compounding negative headline/macro risks with IBIT. Bloomberg’s Eric Balchunas reports that IBIT had a top-five volume day last Friday. IBIT Lagged in January StockCharts.com IBIT a Top-5 Volume Session on January's Final Trading Day Eric Balchunas, Bloomberg Bitcoin -12% YTD Through Sunday Morning, Feb 1 StockCharts.com Bitcoin -24% YoY StockCharts.com Bigger picture, Bitcoin is now mired in a 38.5% drawdown from its all-time high notched less than four months ago. It has been a swift downswing, all while global stocks have been on a heater. The All-Country World Index (ACWI) printed several record highs in January. This leaves crypto bulls reeling and asking pointed questions: We are now several years into the institutional adoption of Bitcoin , yet it’s still not a reliable currency from a method-of-payment perspective. When does that change? Will it ever? Bitcoin remains among the most risk-on assets when geopolitical fear spikes. We commonly see sharp drawdowns (often followed by snapbacks). Will it ever be seen as a flight-to-safety play? Crypto has not performed well since inflation began to surge some four years ago. The “HODLers” proclaimed that it was an inflation fighter, but there is little evidence to back that up in terms of price action. If we see global inflation resurface in the back half of the roaring 2020s, does this attribute reverse? Bitcoin & Ether Drawdowns Are Now Significant Koyfin Charts Technically speaking, Bitcoin has now retraced almost half of the late 2022 to October 2025 rally. Notice in the chart below that the cryptocurrency is now very close to its range highs from two years ago. Moreover, the March-April 2025 lows are being tested (and potentially violated) as we head into the middle stretch of Q1 2026. Below $74,000 (my bottom call from the November article), we may have to look at the 61.8% retracement down at $58,000. Also take a look at the RSI momentum oscillator at the top of the graph—it now matches the deepest oversold conditions going back to August 2023. Bitcoin: Monitoring $58,000 as Fibonacci Support StockCharts.com Nearer-term, Bitcoin ’s November-January rally paused at the key 38.2% Fibonacci retracement of the October-November decline. So, it did everything right technically, as far as the IBIT bears were concerned. For now, resistance is apparent near $86,000 (the breakdown level from last week) and $98,000 (the YTD peak). Bitcoin: Price Peaked at the 38.2% Fibonacci Retracement StockCharts.com Seasonally, IBIT should have rallied in January. The fact that it bucked the long-term calendar trend bodes poorly for short-run performance. According to data from Barchart going back to 2011, January had averaged a double-digit return. The same now goes for February, with continued average strength through the second quarter. Down 5 straight months, the trend appears to be in the bears’ corner. But the last time we saw a monthly string of losses like this, 2018 into 2019, a strong bullish reversal occurred after the 6 th down month. Bitcoin: Bullish February-July Trends Barchart The Bottom Line I have a buy rating on IBIT. The ETF recorded a near-term bottom near the time of my previous analysis but then paused right at a key retracement level. Today, with IBIT implied volatility expected to spike this week and technical support in play, I see it as a contrarian long play. The chart shows deeply oversold conditions, while historically, seasonality is actually strong.