beerish

The psychology of letting your portfolio define you
I don’t enjoy being the one to spoil the mood, and I’m not here to celebrate anyone else’s losses. But I do need to say something a lot of people in crypto won’t want to hear. And we know they won’t want to hear it because we’ve watched the denial play out for the last six months, which is exactly the point of what I’m about to explain.
Bitcoin is heading to $40,000. Call it $50,000 if you want to be optimistic.
As I’m writing this on a Friday morning in February 2026, it’s trying to reclaim $71K after tagging $60K overnight. That 15 percent daily drop was the sharpest selloff since the FTX fallout. From the $126K peak in October 2025, we’re now down more than 50 percent.
Yet the dominant narrative across crypto is that this is a gift. A dip to buy. Diamond hands. Zoom out. Stack sats. Have fun staying poor. Few understand.
You already know the script.

We know the script because there are always loud voices at the intersection of money, tech, regulation, and human nature, making wildly irrational moves and calling it “strategy.”
And what I’ve been watching in crypto doesn’t look like a buying opportunity at all. It looks like a textbook setup for a very specific kind of collapse, one I don’t think anyone has properly named or explained yet.
Alright, let’s finally talk about the elephant in the room.
I’m going to name it, and I’m going to explain it.
I’m calling it the Belief Rigidity Cascade. (Please imagine jazz hands here. I worked hard on them.)
And look, I didn’t wake up this morning planning to invent a behavioral economics theory. I was just trying to figure out why this cycle feels so painfully familiar. Why it has that same eerie, everyone-holding-their-breath vibe that every crypto crash has… except somehow worse this time.

So I did what any reasonable person does when procrastinating emails on a Friday morning. I spiraled into a research rabbit hole involving social identity theory, phase transitions in physics, preference falsification in collapsing political regimes, and a 1993 study about college students pretending to like alcohol more than they actually did.
And here’s what I found,
The thing nobody talks about
Most theories of bubbles and crashes, and there are a lot of them, miss something that matters in crypto. Not in markets broadly, in crypto specifically.

They miss this: Bitcoin isn’t just an investment. It’s an identity.
And I don’t mean that in a soft, vague “people really love their Bitcoin” way. I mean it in the social-psychology sense. “Bitcoin maxi” functions like a social identity category the way “Democrat,” “Catholic,” or “Marine” does. It comes with behavioral rules (HODL, buy the dip, evangelize, stack sats), rewards for conformity (status, engagement on X, conference invites, that “few understand” aura), and punishments for deviation (mockery, social exile, “paper hands,” “you don’t get it,” and the ultimate curse: NGMI).
This is not how people relate to index funds. Nobody gets labeled “paper hands” for rebalancing a 401(k). Nobody is posting “gm” in a Vanguard Total Market community, although honestly someone should do it just for the trolling value. There’s no “laser eyes” equivalent for Treasury holders. Nobody tells you “have fun staying poor” because you bought municipal bonds.

That identity difference is the whole game. Because once an investment becomes part of who you are instead of something you own, the decision-making system changes. Selling stops being a financial choice and becomes an identity crisis. And people will do almost anything to avoid an identity crisis, including losing comically large amounts of money.

The closest historical parallel isn’t even a financial market. It’s the 1980s farm crisis, where “farmer” wasn’t just a job, it was a bloodline. Your grandfather’s land. Your family name on the mailbox.
Yes, I found a way to talk about farming in an essay about Bitcoin. Fun Bitcoin fact: the first time I ever heard of Bitcoin, it was from a farmer. He was very right for about a decade, and then very wrong, which is basically the thesis of this essay in miniature.
They were told to “get big or get out,” and they got big, buying land at ridiculous multiples of productive value because “land never goes down,” “they’re not making more of it,” and because if you weren’t expanding, you weren’t a real farmer. Narrative piled on narrative. Identity hardened. Community pressure kept people holding on. In some ways it ran deeper than crypto because it was tied to place, lineage, and physical labor in a way a wallet address never will be.
Farmers held until banks took the land. The human cost was brutal.
But here’s the critical difference. Farmland produces something. It generates revenue. Even when prices collapsed, there was a floor: the productive value of the soil.
Bitcoin doesn’t have that floor. There’s no crop. No rental yield. No discounted cash flow that tells you what a Bitcoin is worth independent of what the next person will pay.
That’s the difference between a painful correction and a phase transition.
The six stages of how this plays out

So what does this actually look like in real life? I took all the theory-brain stuff and mapped it into a six-stage process. The uncomfortable part is we’re already in the later innings. Here’s the flow.
Stage 1: The stories pile up

Every narrative asset starts by stacking explanations. Bitcoin was peer to peer electronic cash. Then it was an inflation hedge. Then digital gold. Then a store of value. Then an uncorrelated asset. Then a portfolio diversifier. Then protection from government overreach. Then an institutional grade asset class. Then a strategic reserve asset. I’m out of breath just typing that, and I’m not even done with the coping arc.

Here’s the tell. Each new narrative is harder to disprove than the last.
Peer to peer electronic cash is testable. Are people actually buying coffee with Bitcoin? No.

Inflation hedge is testable. Does Bitcoin reliably rise when inflation rises? It absolutely did not in 2022.

But “store of value” and “digital gold” are basically vibes. You can’t falsify a vibe.
And that’s not random. It’s selection.
The narratives that can be tested eventually get tested, fail, and die. The narratives that can’t be tested survive. Over time you end up with an investment thesis that’s almost immune to evidence. It feels like strength, but it’s really the start of fragility.
Every story that collapses gets replaced by a story that’s harder to knock down, until eventually all that’s left is vibes.

Stage 2: You become your bag, and your bag is not Hermès

This is where it stops being finance and starts being psychology.
As the stories stack and price goes up, holding BTC becomes part of your identity. Not “I own Bitcoin.” More like “I’m a Bitcoiner.” And once that happens, selling doesn’t feel like a trade. It feels like betrayal. Like admitting you were wrong. Like losing status and community. So even when selling is the smart move financially, it still feels awful. And people avoid that pain.
Stage 3: The belief moat

After identity locks in, your brain starts auto defending the position. Not with lies you can see, but with “analysis.”

Dip? Weak hands.

Bigger dip? Generational entry.

Bad news? Actually bullish.

Regulation? They’re scared.

Adoption slowing? We’re early.

Every negative signal gets flipped into a positive one. Not because people are dumb, but because when your identity is on the line, the bar for “good enough logic” drops hard.
And behavior changes too. In normal markets, long drawdowns slowly shake people out. In crypto, you often get the opposite: people hold harder, even buy more. The pressure doesn’t release, it builds behind a conviction dam.
Stage 4: The stories start breaking

While everyone is busy “staying strong,” the old narratives quietly die.

Inflation hedge, uncorrelated asset, institutional wave… they all sound great until the chart keeps disagreeing. So the market falls back on the unfalsifiable ones: store of value, digital gold.

Problem is, those aren’t great at bringing in fresh buyers. They mainly keep existing believers in. So the price starts depending less on new demand and more on current holders refusing to sell. That’s a sketchy setup because it means the most emotional people in the market become the load bearing walls.

Stage 5: Everyone is acting confident

This is the late stage vibe.
A lot of people are privately nervous, checking price nonstop, doing exit math, feeling the narratives weaken. But publicly they still post conviction because everyone else looks confident too.
So you get this weird situation where most people are unsure, but nobody wants to be the first to say it. The community ends up propping up a confidence that isn’t really there.
Stage 6: The break, and the overshoot

Then a chunk of people finally cracks.
Once selling becomes socially “allowed,” it spreads fast. And it doesn’t unwind gently, because identity doesn’t unwind gently.

People don’t scale out like a calm investor. They rage sell. They nuke the position. They go from “diamond hands forever” to “I can’t believe I bought this.” And that emotional flip is why crypto crashes overshoot so hard.
It’s not just a market move. It’s a social move, plus an identity break, priced in all at once.
Where we are right now

Here’s a tighter, more casual version that keeps the punch but cuts the essay weight.
So let me map this onto the current cycle, because the market is literally acting it out in real time.

Bitcoin topped around $126K in October 2025. Since then it’s been bleeding lower for months, grinding through $100K, then $90K, then $80K. And every level had the same chorus: “buy the dip”… just a little less confident each time.
Then this week happened.

Bitcoin dropped 30% in five days. On Thursday night it nuked 15% in a single session, worst day since FTX, briefly breaking below $61K. Over $2B in leveraged positions got wiped, and more than $2T in total crypto market cap has disappeared since the year started.
And then this morning it bounced back above $70K.
That bounce is the part you need to watch.
Because it’s not a recovery. It’s Stage 3.

This is the Belief Rigidity Cascade playing out live. Price hits a brutal drawdown level, and the most identity-entrenched holders do what they always do: they buy it aggressively. The market rips back, and the narrative instantly snaps into place.

“See? Bottom is in.”

“Diamond hands win again.”

“This was the dip you were supposed to buy.”

The copium writes itself.

That’s the belief moat doing its job. The biggest red candle in four years gets turned into proof that everything is fine… within hours.
But here’s what the bounce doesn’t tell you.

The institutional story is actively breaking. ETFs that were buying hard last year are now net sellers. The biggest bullish narrative of this cycle, “Wall Street is here,” is literally dying in the data. That’s Stage 4 happening in real time.
The technical damage is also nasty. Bitcoin just broke below its 365-day moving average for the first time since early 2022. That’s not a cute dip. That’s a regime shift.
And the leverage feedback loop is waking up. If BTC slips another 10%, miners start getting stressed, forced selling ramps up, and the whole thing turns into a self-reinforcing liquidation machine. That’s when leverage unwinding and identity panic start feeding each other.

The question isn’t whether we bounce. Crypto always bounces.

The question is whether this bounce can actually make new highs.

If $71K becomes just another lower high, after $126K, then $100K, then $90K, then $78K, then $71K… the script stays the same. Each bounce gets weaker, each narrative gets shakier, and it takes more effort to pretend everything is fine.
Watch the next week.
If the vibe is loud and triumphant, “see, we’re saved,” that’s Stage 3 denial still holding.

If it’s quieter and defensive, “well… at least we bounced,” that’s conviction fraying.

And if people are tweeting WAGMI while wallets are quietly moving coins to exchanges and stablecoins are piling up, that’s Stage 5 starting to show.
Basically, they’re saying “few understand”… while their on-chain behavior is screaming “I’m nervous.”

HODL waves have been expanding during this drop. Long term holders aren’t selling, they’re accumulating. That’s the dam getting taller while the pressure behind it keeps rising.
Meanwhile the narratives are collapsing one by one.

“Strategic reserve” didn’t deliver what people promised.

“Institutional adoption” didn’t stop the drawdown.

Now we’re back to the unfalsifiable stuff: “digital gold” and “store of value.”
Which works great for believers, but does nothing to pull in fresh buyers.
So my view hasn’t changed. If anything, this week sped up the timeline.
Bitcoin goes to $40K to $50K. That’s a normal 60 to 70 percent drawdown for crypto. It fits every cycle.
And the trigger will be something that looks shocking in the moment, but obvious in hindsight. It always is.
Today’s bounce feels like hope. The theory says it’s the dam flexing. And the scary part is simple. The dam doesn’t leak. It breaks.

Sources
Akerlof, G. A., & Kranton, R. E. (2000). Economics and Identity. The Quarterly Journal of Economics, 115(3), 715–753.
Centola, D., Becker, J., Brackbill, D., & Baronchelli, A. (2018). Experimental evidence for tipping points in social convention. Science, 360(6393), 1116–1119.
Festinger, L. (1957). A Theory of Cognitive Dissonance. Stanford University Press.
Kindleberger, C. P., & Aliber, R. Z. (2005). Manias, Panics, and Crashes: A History of Financial Crises (5th ed.). John Wiley & Sons.
Kunda, Z. (1990). The case for motivated reasoning. Psychological Bulletin, 108(3), 480–498.
Kuran, T. (1995). Private Truths, Public Lies: The Social Consequences of Preference Falsification. Harvard University Press.
Minsky, H. P. (1986). Stabilizing an Unstable Economy. Yale University Press.
Prentice, D. A., & Miller, D. T. (1993). Pluralistic ignorance and alcohol use on campus: Some consequences of misperceiving the social norm. Journal of Personality and Social Psychology, 64(2), 243–256.
Shiller, R. J. (2019). Narrative Economics: How Stories Go Viral and Drive Major Economic Events. Princeton University Press.
Tajfel, H., & Turner, J. C. (1979). An integrative theory of intergroup conflict. In W. G. Austin & S. Worchel (Eds.), The Social Psychology of Intergroup Relations (pp. 33–47). Brooks/Cole.

This essay is adapted from a longer academic paper, “The Belief Rigidity Cascade: Identity-Driven Phase Transitions in Narrative-Anchored Asset Markets” (Cline, 2026), which includes formal modeling, a full literature review, and detailed case studies of five historical BRC events.

If you’re a Bitcoin maximalist who read all of this and you’re furious, especially today, especially after the bounce, especially because it feels like the worst is over, I get it. That’s Stage 3. I’d probably be mad too.

If you’re a Bitcoin maximalist who read all of this and felt that quiet drop in your stomach, especially today, especially because the bounce didn’t make you feel as relieved as you thought it would, that’s Stage 5. And I’m sorry.
Either way, do you, my friend.