Selling pressure overwhelms new capital inflows. Institutional unwinding and lack of buying intent define the current cycle.
CryptoQuant CEO Ki Yong-joo has declared the current Bitcoin market to be in a definitive bear cycle, warning that a full-fledged recovery could take months and further price declines may be needed before a sustained recovery is realized.
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Capital inflows also fail to move the needle
In an interview with a South Korean cryptocurrency outlet, Joo laid out a data-driven case for the long-standing vulnerability. He pointed to a fundamental imbalance between capital inflows and selling pressure.
“Hundreds of billions of dollars are flowing into the market, but the overall market capitalization is stagnant or declining,” Ju said. “That means selling pressure is overwhelming new capital.”
He noted that past large corrections typically required at least three months of correction before investment sentiment recovered. Zhu stressed that the short-term rebound should not be mistaken as the start of a new bullish cycle.
Two paths to recovery
Ju outlined two scenarios for Bitcoin’s eventual recovery. The first is that the price will decline towards a realized price of approximately $55,000. The price is based on the average cost of all Bitcoin holders, calculated from on-chain transaction data before the rebound. Historically, Bitcoin has needed to revisit this level to generate new upward momentum.
The second scenario assumes an extended period of sideways price movement in the $60,000 to $70,000 range. By the next leg, prices will be worn away through several months of range trading.
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In either case, Ki emphasized that the preconditions for a sustained rise are not currently in place. ETF inflows have stagnated, over-the-counter demand has dried up, and realized and standard market caps have both remained flat or declined.
The institutional drain behind the decline
Ju believes much of the recent selling has been due to institutional investors unwinding their positions. As Bitcoin volatility has diminished over the past year, financial institutions that have entered the market to capture volatility through beta-delta neutral strategies have found good opportunities in assets such as the Nasdaq and gold.
“When Bitcoin stopped moving, there was no reason for financial institutions to maintain their positions,” Zhu explained. CME data shows that financial institutions have significantly reduced their short positions, but this is not a bullish signal but evidence of capital withdrawal.
Ju also warned of aggressive selling patterns, where large amounts of Bitcoin are dumped at market prices within a very short period of time. He believes this suggests either a forced liquidation or a deliberate sale by institutional investors to manipulate derivatives positions.
The outlook for altcoins is even grimmer
The situation for altcoins is even more dire. Zhu noted that while altcoin trading volumes appeared robust throughout 2024, actual new capital inflows were limited to a small number of tokens with prospects for ETF listing. Broad altcoin market caps have not significantly exceeded their all-time highs, indicating that funds are simply rotating among existing participants rather than expanding the market.
“Gone are the days when a single story could lift the entire altcoin market,” Ki said. He acknowledged that structural innovations such as an AI agent economy could eventually create a new value-driven model for altcoins, but dismissed the possibility of a return to a simple narrative-driven rally.
He concluded, “The potential for altcoins to rise in the short term is limited. The damage to investor sentiment caused by this economic downturn will likely take a considerable amount of time to heal.”
