Key Takeaways
- •Institutions are consistently accumulating Bitcoin, even through periods of volatility, demonstrating long-term investment conviction.
- •While Bitcoin valuations show signs of overheating, they are not yet at extreme levels, and recent market corrections have flushed out short-term traders, creating room for further upward movement.
- •The global liquidity environment remains favorable with record-high M2 money supply, and the Federal Reserve's rate cuts are expected to continue, supporting risk assets.
Institutions Buy Through U.S.-China Trade Uncertainty
Bitcoin's market momentum experienced a slowdown in Q3 2025 after a strong Q2. Despite reaching an all-time high on October 6, renewed U.S.-China trade tensions triggered an 18% correction. This volatility, as indicated by the Bitcoin Volatility Index (BVIV), spiked after September, amplifying market uncertainty.
This correction is viewed as temporary, primarily driven by geopolitical factors. Strategic accumulation by institutions, notably MicroStrategy (MSTR), has continued and even accelerated. The broader macroeconomic environment also provides support, with global M2 money supply reaching historic highs and the Federal Reserve implementing rate cuts, signaling a favorable landscape for risk assets.
Institutional money flows remained robust throughout Q3, with significant net inflows into Bitcoin spot ETFs. These inflows continued into Q4, with the first week of October recording the largest weekly inflow of the year. This trend highlights institutions' strategy of using price corrections as opportunities for strategic entry. MicroStrategy (MSTR) exemplified this by continuing to purchase Bitcoin despite market downturns, adding substantial amounts within a single week, underscoring their firm belief in Bitcoin's long-term value.
On-Chain Data Signal Overheating, Fundamentals Unchanged
On-chain analysis indicates some signs of market overheating, although current valuations are not yet considered extreme. The MVRV-Z indicator, while in overheated territory, has stabilized compared to previous peaks. Similarly, the NUPL ratio shows moderation from prior levels of high unrealized profit.
The adjusted Spent Output Profit Ratio (aSOPR) remains close to equilibrium, suggesting no immediate cause for concern regarding investor profitability.
Bitcoin's transaction count and active users have shown a temporary slowdown in network growth momentum. However, total transaction volume has increased, indicating that larger amounts are being moved in fewer transactions, which could signify increased large-scale capital movements.
The increase in money flowing into centralized exchanges suggests a potential short-term selling pressure. Without a corresponding improvement in fundamental indicators like transaction count and active users, this rising transaction volume may reflect short-term capital movements rather than a genuine expansion of demand.
October 10 Crash Proves Institutional Market Shift
The significant price correction on October 10 served as a clear demonstration of Bitcoin's market shift towards institutional dominance, moving away from retail investor influence.
The market's reaction to this correction differed substantially from previous instances. Unlike in late 2021, where retail-driven fear led to a market collapse, this time corrections remained contained. Institutions actively continued to buy following liquidation cascades, indicating their role in defending downside levels. Furthermore, institutions appear to perceive these corrections as healthy consolidation phases that effectively remove overheated speculative demand.
In the short term, cascade liquidations can lower the average entry price for retail investors and increase psychological pressure, potentially leading to heightened volatility due to weakened sentiment. However, if institutions persist in their accumulation during this sideways market, this correction is likely to lay the groundwork for the next upward price movement.
Target Price Raised to $200,000
The Q3 analysis, utilizing the TVM methodology, establishes a neutral base price of $154,000, representing a 14% increase from the previous quarter. By applying a -2% fundamental adjustment and a +35% macro adjustment, a target price of $200,000 is projected.
The -2% fundamental adjustment accounts for the temporary slowdown in network activity and the observed increase in deposits to centralized exchanges, which signal short-term weakness. The 35% macro adjustment remains consistent, driven by ongoing global liquidity expansion, continued institutional inflows, and the Federal Reserve's commitment to rate cuts, all of which are powerful catalysts for Q4 price appreciation.
While near-term corrections may arise due to overheating indicators, these are considered healthy consolidation rather than indicative of a shift in the overall trend or market perception. The consistent rise in the base price demonstrates a steady increase in Bitcoin's intrinsic value. Despite temporary market fluctuations, the medium to long-term upside potential for Bitcoin remains strong.