The recent drop was due not so much to a change in fundamentals as to the washing out of excessive speculation, BCA strategists led by Artyom Sakhbiev said in a Thursday report.
Bitcoin's sharp December reversal creates conditions for the market to return to macroeconomic drivers after a period dominated by forced deleveraging and microlevel stresses, according to BCA Research.
The movement began with a 10% decline before the opening of trading on Monday, after which the exchange rate recovered above $90,000. BCA attributes this model to a series of local shocks, rather than changes in risk appetite or profitability.
The company highlights the repositioning of quantitative strategies, the downgrade of Tether by S&P Global, the MicroStrategy signal about the possible sale of bitcoins and increased pressure due to the tightening of China's cryptocurrency policy as notable catalysts.
The positioning data shows that sentiment has deteriorated rapidly. In October, a record $19 billion worth of long positions were eliminated, and the "market value to net asset value" ratio for bitcoin treasury companies fell below 1, indicating a pessimistic outlook.
Strategists also note that the supply share of profits has fallen to 65%, the lowest level since the end of 2023, along with the collapse of the index of fear and greed of the crypto market to levels last seen during the crypto winter of 2022.
After the leverage has largely disappeared, the team claims that the asset is ready to "return to macroeconomic drivers again as institutional demand continues to grow." The long-term narrative, they say, remains unchanged.
Vanguard has started allowing cryptocurrency investments on its platform, and Bank of America has approved 1-4% of the cryptocurrency distribution for wealth management clients. Flows into ETFs have turned positive again, and BCA's global asset allocation strategy notes that stable inflows have helped reduce volatility over time.
The BCA confirms that bitcoin continues to function as an "insurance asset of global wealth," benefiting from limited supply and growing demand as global wealth expands. The strong performance of gold and silver is cited as additional evidence of a sustained appetite for alternative reserves.
However, short-term risks remain, especially after bitcoin dropped below key technical support. However, BCA claims that the price is holding above the True Market Mean — the base value of active investors — which indicates that the broader uptrend is continuing.
The company upgraded bitcoin's rating to "outperform" on December 1, considering any move below $90,000 as an attractive entry point for long-term investors.
"With excess speculation washing out and the structural bullish scenario unchanged, current levels are becoming attractive again — especially for investors with a constructive view of risk," the strategists wrote in the report.
They also point out that bitcoin's recent lag behind gold seems excessive. The fractal indicator tracking the BTC/gold ratio now "indicates an increased chance of a reversal," which supports a tactical long position on this spread.