Is this the end of the cycle?

In our last update, we outlined two paths into year-end: a bull case where Bitcoin held above $100K and a bear case driven by sustained market stress. With BTC now below $100K and trading under its 50-week moving average (MA) for the first time this cycle, we’ve clearly entered the downside scenario.

MARKET CONTEXT

Crypto markets have extended their downside, with total market capitalization shedding another $200B. Bitcoin’s breakdown triggered a broader risk-off move across the market, with many altcoins falling 10–15% on the week. Nearly $4B in leveraged positions were liquidated over the past seven days, a wave of forced selling that pressured prices in an already thin liquidity environment.

MARKET SETUP & SHORT-TERM RISKS

REASONS FOR THE DRAWDOWN

• Forced liquidations in a structurally thin market: The recent deleveraging hit into declining market depth, with spot order-book liquidity now unusually thin. In these conditions, even modest sell pressure can trigger outsized price swings.
• Whale distribution and ETF outflows: Long-term holders are holding ~42K fewer BTC (around $4B) than at the start of the month, while spot Bitcoin ETFs have now posted three consecutive weeks of outflows. Thursday alone saw $866M redeemed, the second-largest single day ever.
• Macro liquidity vacuum: The government shutdown and Treasury General Account rebuild pulled an extra $150B out of the system while spending was frozen, and liquidity conditions still remain in limbo. Crypto, as the most liquidity-sensitive asset class, absorbed the impact most severely.
• AI-driven sentiment reversal: Growing debate around AI overvaluation triggered a rotation out of tech. Bitcoin’s correlation to tech equities has risen in recent weeks to above 80%, leaving crypto exposed to the broader valuation reset.
• Fed policy repricing: Hawkish Fed commentary pushed December rate cut odds from 95% to 46%, suppressing risk appetite. This week’s FOMC meeting minutes and unemployment data will be key to any sentiment rebound.

WHAT MARKETS ARE TELLING US

• Price levels to watch: $98–100K is now the primary resistance, with $85K as the first major support. A break below $85K would likely target the stronger demand zone near $75K, though on-chain data shows meaningful buyer interest around the $80K–$82K range.
• Strength gauge: Bitcoin’s Relative Strength Index (RSI) is now at its lowest level since the FTX collapse in 2022, despite no equivalent stress event in the current market.
• Leverage reset: Open interest has dropped 9% to $31B, returning to July levels. However, funding remains positive which suggests long-side leverage hasn’t fully reset yet.
• Death cross is lagging: BTC’s 50D MA just crossed below the 200D, but it’s the fourth of this cycle and second this year, and every previous instance marked a local bottom, not a sustained downturn.

SILVER LININGS & FUNDAMENTALS TO WATCH

1. Selling pressure is fading: While short-term holders are selling at a loss, large-scale selling has slowed, with coins rotating into stickier long-term hands. Historically, this shift from weak to strong holders has marked the late stage of a selloff and often precedes bottom formation.
2. Liquidity backdrop is set to improve: The liquidity vacuum that pressured crypto is easing. The government shutdown is over, allowing spending to resume, while QT is set to end. Global money supply is also expanding, and historically Bitcoin has lagged these expansions before catching up. 
3. ETF pipeline & regulatory clarity: 100+ crypto ETFs await approval, and US regulatory clarity via the Clarity Act (expected early 2026) could remove another key barrier.
4. Long-term structural demand drivers: Debt, tariffs, and monetary dilution continue to reinforce the “debasement trade.” Gold is up ~50% this year with over $50B of inflows, more than the previous two decades combined. Bitcoin is the digital extension of that trade.
5. Cycles favor Bitcoin vs tech over the long-run: Outside of deep bears, Bitcoin has outperformed tech every year over the past decade. 2025 is the first period where BTC is lagging without a bear backdrop, a setup for catch-up once liquidity returns and risk appetite rebuilds.
6. Extreme fear ≠ structural risk: Sentiment is back at 2022 lows, but there’s no systemic stress this time. The market is now institutionally anchored, with ~16% of Bitcoin supply held by corporates, governments, and ETFs. Historically, fear at these levels has marked opportunity, not breakdown.

BULL VS. BEAR SCENARIOS 

BULL CASE → CONSOLIDATION & GRADUAL RECOVERY (70%) 

• If BTC holds the $85K–$90K region and reclaims $98K–$102K, it would confirm selling exhaustion and likely reopen the path toward $110K–$115K into early 2026.
• With leverage reset, ETF outflows slowing, and liquidity conditions improving, risk appetite can gradually rebuild, especially in quality altcoins now down 70%+ from highs.

BEAR CASE → EXTENDED DRAG (30%)

• A break below $85K could extend the correction toward the $76K–$80K demand zone. This would imply a longer consolidation phase and delay recovery until liquidity inflects and sentiment stabilizes.
• Risks remain broadly tied to macro: policy uncertainty, delayed easing, and continued liquidity stress, rather than the deterioration of any crypto-specific fundamentals.

We have entered the downside scenario we outlined in our prior note, but the cycle structure remains intact. If liquidity continues to normalize and Bitcoin regains the $100K level, the broader uptrend can resume. Historically, similar drawdowns have marked consolidation phases before the next leg higher, and current conditions still point toward reset, not reversal.