Bitcoin Has Dropped 28% Since Its Peak in October. Will It Continue to Fall in 2026?

Bitcoin (CRYPTO: BTC) hasn't been cooperating with investors' wishes since its early Oct. 6 peak of more than $126,000, and as of Jan. 8, it's 28% below its high-water mark. Interestingly, despite making that new all-time high, Bitcoin actually lost 6% of its value last year.

So will it keep falling through 2026 after a disappointing 2025, or was it just gearing up for a big move?

Image source: Getty Images.

The next leg could depend more on market conditions than anything else

As unsatisfying as it is to admit, Bitcoin is an asset that's highly sensitive to macroeconomic conditions, including the amount of money circulating in the global financial system.

A lot of Bitcoin's short-term performance comes from liquidity, meaning how easy it is for investors and financial institutions to get cash, deploy it, and take risks where there are risks worth taking. When liquidity rises due to changes in business activity or government policy, like in the federal funds rate, risk assets like Bitcoin often trend higher, but when it falls, even good assets with strong investment theses can get marked down.

Historically, Bitcoin has behaved a bit like a global liquidity barometer, with expansions in broad money and credit conditions lining up with stronger periods for the coin more often than not.

This is where it's possible to map out a few cases for 2026. If inflation cools and central banks keep easing financial conditions such that money is cheaper to borrow and more plentiful in the financial system, Bitcoin will probably spend more time grinding up than down, as it's a convenient place for excess capital that's looking for a return when safer assets look less appealing. On the other hand, if inflation reaccelerates or credit conditions tighten meaningfully, Bitcoin can absolutely fall further. Again, this is a statement about short-term probabilities and their likely impacts rather than the strength of its investment thesis, which isn't something that's at risk of being disrupted by the phenomena we're discussing.

The Oct. 10 crypto flash crash is a useful reminder of how tightening liquidity conditions can look in real time. In that episode, thin liquidity and rapid forced selling cascaded across crypto markets, creating a dramatic collapse that had more to do with market structure than with a new fundamental discovery about Bitcoin's long-term value. Of course, another flash crash of the same sort is (hopefully) probably not in the cards for this year.

Astute readers will recognize that none of the above actually tells you where Bitcoin will land on any specific date in 2026. Making such predictions is closer to guesswork anyway. The truth is that the coin can indeed fall further if financial conditions turn hostile, and it can also recover briskly if conditions loosen -- or still recover slowly even if they don't. This isn't something that's possible to have certainty about, especially when the period in question is just the next 12 months.

Use a process that doesn't require timing the market

Bitcoin's core investment thesis is that its supply is capped, and new supply becomes harder to produce over time due to the halving, which reduces the rewards for mining new coins by half. New issuance will trend lower for decades by design. That means as long as there's some demand in play, the price of Bitcoin will likely trend higher over time, as supply will become scarcer and force buyers to compete with each other to secure some of the asset (in theory).

For most investors, the best way to exploit this dynamic is dollar-cost averaging (DCA), which means investing a fixed dollar amount on a regular schedule in Bitcoin, regardless of its price; automating a DCA process is easy to do with most investment platforms today.

If you DCA, it doesn't really matter if Bitcoin rises or falls in 2026, as your cost basis will be spread out evenly over many purchases. If the asset rises in price, you get the benefit of the gain. If it falls, you get the benefit of accumulating the asset at a cheaper price than before. And if it does nothing, you still end up with more of the coin at the end of the year than you did at the start.

If your time horizon is long enough, you can count on Bitcoin's scarcity to keep doing its work and increasing the value of the coin. There may or may not be a cheaper Bitcoin available to purchase in 2026, but you can choose to be positioned to win no matter what happens.

Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.