Bitcoin’s dramatic slide from $126,000 to below $100,000 sparked panic and billions in forced liquidations, but the recovery was just as swift. The cryptocurrency has since climbed back above $100,000, showing that the bulls aren’t done yet.
It’s a sharp change in tone from the euphoria that followed Bitcoin’s all-time high near $126,000 earlier this year. Now, sentiment has swung to fear, even as the macro backdrop of rate cuts, improving liquidity, and ETF adoption looks more supportive than it has in years.
From where I stand, this isn’t the start of a structural bear market. It looks more like a reset within a longer cycle: a shakeout designed to clear excesses before the next phase begins.
Why the Drop Happened
The sell-off that pushed Bitcoin below $100K was largely mechanical. Leverage had built up to extremes across derivatives markets, and when momentum slowed, a chain of forced liquidations followed. Over $1 billion in long positions were wiped out within hours; a typical washout event that marks late-stage corrections.
At the same time, capital rotated toward AI and semiconductor stocks, where optimism around U.S.–China trade progress and corporate earnings reignited risk appetite.
In crypto, by contrast, traders looked tired. Good news stopped moving markets, bad news hit harder, and momentum simply ran out of fuel.
On the macro side, things are shifting, but the business cycle hasn’t fully caught up. Rates are falling, quantitative tightening is over, and liquidity is building, but growth remains uneven.
To me, that suggests this is a delayed liquidity cycle, not a broken one. The fuel is there; the spark just hasn’t hit yet.
The Quiet Strength Behind the Bounce
What stood out most during this reset was what didn’t happen. There were no exchange failures, no stablecoin dislocations, and no credit contagion. The market structure held up remarkably well, proof that crypto’s institutional backbone has matured.
Meanwhile, stablecoin supply surged to record highs above $300 billion, even as Bitcoin fell. That signalled that investors hadn’t left the ecosystem — they’d simply moved to the sidelines, holding “crypto cash” and waiting for conviction to return.
Now that prices have stabilised and liquidity conditions are improving, that dry powder is flowing back in. The Stablecoin Supply Ratio (SSR), which compares Bitcoin’s market value to circulating stablecoins, remains at levels historically associated with early-stage recoveries, not late-cycle exhaustion.
From a macro standpoint, this tells me one thing: the capital base never left — it just waited for a better entry.
Bear Market or Mid-Cycle Reset?
Technically, Bitcoin meets the textbook definition of a bear market: more than a 20% drop, a break below its 200-day average, and fading momentum across on-chain metrics like MVRV.
But charts don’t tell the whole story.
On the charts, yes, you can call this a bear market. From a macro angle, it looks more like a reset within a larger liquidity cycle — not the end of it. Monetary policy has started to ease, but the business cycle hasn’t fully kicked in yet. If liquidity really ramps up into 2026, this drawdown could look like a mid-cycle shakeout before the main move, not the final chapter.
Bitcoin is trading above $100K, but a break below this level could see it heading toward $92K–$95K — areas where previous futures gaps and long-term averages align, potentially forming a base for accumulation if stablecoin flows rotate back into spot markets.
What Could Help Bitcoin Recover
- Time and Stability
Markets need time to digest forced selling. With leverage cleared, Bitcoin now has a cleaner base — one that could support a slower, more sustainable rebound.
- Rising Liquidity
With rate cuts underway and quantitative tightening behind us, global liquidity is expanding again. Deficit spending and low real yields continue to create a backdrop that favours scarce assets like Bitcoin.
- Regulatory Clarity and Product Expansion
New ETF products and improving regulatory visibility are unlocking additional institutional and retail capital. That should gradually rebuild confidence, particularly if stablecoin oversight continues to mature.
- Scarcity Premium
Bitcoin’s scarcity narrative remains untouched. In a world of debasement and deficits, truly scarce assets still attract capital. If liquidity accelerates in 2026, I expect Bitcoin to reclaim higher ground — not as a speculative frenzy, but as part of a broader macro rotation into hard collateral assets.
Analyst Remarks
From my perspective, this correction doesn’t mark the end of the story, it’s just the pause between chapters.
The macro landscape still favours Bitcoin: falling real rates, ongoing fiscal expansion, and persistent demand for scarce assets. Investors haven’t left; they’ve simply shifted to the sidelines.
Stablecoin balances are at record highs, and that’s a key signal that capital is still in the ecosystem, waiting for confidence to return.
If liquidity expands as expected into 2026, this could end up being a mid-cycle reset rather than a top. It’s a painful pullback, yes, but also a cleansing one, and that’s usually where new opportunities begin.
Disclaimer
The views and opinions expressed in this article are those of Justin Khoo, Market Analyst at VT Markets. They reflect his personal market analysis and insights, and do not necessarily represent the views or official position of VT Markets. This commentary is for informational purposes only and should not be taken as financial advice.
