Bitcoin fell 25% from its all-time high of $126,000 on October 6th, an event that has revived fears of a severe bear market. In response, analysts from the research and brokerage firm Bernstein indicate that the current selloff looks more like a temporary readjustment and not the start of a crypto winter.
The Bernstein team, led by Gautam Chhugani, explained in a note to clients this Monday that the market is weighed down by investor anxiety surrounding Bitcoin’s historical four-year cycle pattern. The peaks of 2013, 2017, and 2021 have conditioned participants to expect profit-taking at the end of the year.
Despite the historical comparisons, the firm believes the current environment is fundamentally stronger. Instead of signaling an imminent 60-70% collapse, the firm argues that Bitcoin’s drop is a relatively shallow correction that could soon establish a new local bottom.
Institutional Demand Absorbs Supply
Bernstein has a solid argument, which is the market’s ability to absorb the supply from long-term holders (LTHs). They indicate in the note that approximately 340,000 BTC (about $38 billion) sold by investors who held their coins for at least one year have been almost entirely matched by inflows into spot Bitcoin ETFs and corporate treasuries.
In the last six months alone, $34 billion of new demand has come through these channels, demonstrating that institutional buyers are intervening aggressively. This contrasts sharply with previous cycle peaks, where new supply overwhelmed demand.
Bernstein also dismissed fears that MicroStrategy will be forced to sell its holdings. The firm reiterated that MicroStrategy has no intention of selling and described its leverage ($8 billion in debt against $61 billion in BTC) as conservative. “We expect MicroStrategy to continue buying more bitcoin,” they wrote.
Finally, the firm pointed to political (Trump administration) and regulatory (Clarity Act) tailwinds, in addition to a more favorable liquidity environment. Analysts are closely watching to see if Bitcoin establishes a new bottom near the $80,000 range, a level that, if it holds, could be seen as a buying opportunity.