For the first time since early 2023, Bitcoin has dipped into what analysts are calling the cheap region – a historically powerful mean-reversion zone that has preceded some of the strongest recoveries in BTC’s history.
At the same time, short-term holder losses, ETF outflows, and a hawkish Federal Reserve are testing investor conviction.
But history suggests that periods of extreme fear and realized losses often set the stage for long-term opportunity.
Short-Term Holder Capitulation Hits Post-FTX Levels
According to Glassnode and CryptoQuant data, short-term holders (STHs) — wallets holding Bitcoin for under 155 days — are realizing losses at levels not seen since the FTX collapse in November 2022.
Their average cost basis sits near $110 000, meaning many are exiting positions at 20-30 % losses.
When the market trades two standard deviations below that cost basis, capitulation typically peaks. This mirrors historic “max pain” points in 2018 and 2022, both of which preceded major reversals.
“Everybody wanted to buy Bitcoin above $110 K, but now at $80 K, nobody wants to touch it.”
That’s classic sentiment inversion — and the hallmark of long-term opportunity.
ETF Outflows Pressure the Market
November 2025 has seen record outflows from spot Bitcoin ETFs, totaling roughly $3.8 billion. BlackRock’s IBIT alone accounted for $2.47 billion in redemptions, while Fidelity’s FBTC saw $1.09 billion.
Institutional outflows amplify short-term price weakness, but the data also suggest capital rotation rather than exit — money is moving to cash and short-duration Treasuries as yields remain elevated. As rate-cut expectations rise again, that capital can easily re-enter risk assets.
Global Liquidity Is the Master Variable
Bitcoin’s long-term trajectory remains inseparable from global liquidity. Since 2016, the correlation between the Global Liquidity Index (GLI) and BTC price has averaged 0.94, making it one of the tightest macro-asset linkages in markets.
When central banks expand balance sheets or ease financial conditions, liquidity flows into risk assets, pushing Bitcoin higher. When liquidity tightens — through quantitative tightening (QT) or a stronger dollar — crypto corrects.
Currently, global liquidity is plateauing after a multi-year uptrend. QT ends officially in December 2025, but the timing of renewed QE remains uncertain.
Macro Outlook – Fed Policy, Dollar Strength, and Bitcoin Returns
The Federal Reserve’s policy and US Dollar Index (DXY) remain leading indicators for Bitcoin’s cyclical turns. Whenever real yields rise and the dollar strengthens, Bitcoin’s 12-month returns decline.
Conversely, dovish pivots — rate pauses and cuts — tend to trigger rapid upside. Market-implied odds of a December rate cut have risen from 33 % to 71 %, hinting that the macro pendulum may soon swing back toward liquidity expansion.
If confirmed, this could mark the beginning of the next leg up for risk assets.
Debt, Money Supply, and the Long-Run Bitcoin Thesis
Beyond cycles, Bitcoin’s structural case continues to strengthen. The U.S. federal debt now exceeds $38 trillion, while global M2 money supply has grown exponentially since 2020. Each new deficit cycle ultimately requires monetization — and that means currency debasement.
With its fixed 21 million supply, Bitcoin stands as the only digitally native, verifiable hedge against fiat dilution. Debt and money-supply expansion aren’t bearish — they’re Bitcoin’s long-term fuel.
The Cycle Framework: Three Scenarios Ahead
Base Case – Gradual Re-Accumulation
Short-term capitulation eases, the 200-week EMA holds, and Bitcoin oscillates in the $80 K–$120 K range through mid-2026. Liquidity stabilizes; macro sentiment improves.
Secondary Case – Liquidity Expansion & ETF Revival
The Fed pivots, global liquidity expands, ETF inflows resume, and institutional adoption accelerates. Target zone: $200 K–$300 K+ by 2027.
Bear Case – Prolonged QT & Dollar Dominance
The Fed stays hawkish, QT persists, and Bitcoin revisits deep support near $70 K–$80 K before entering an extended consolidation. Each path depends on the same variable — liquidity. For long-term investors, gradual accumulation during fear remains the statistically optimal approach.
Markets are cyclical; liquidity is structural; conviction is behavioral. Bitcoin’s drawdown into the “cheap region” isn’t a signal of failure — it’s a reminder that value is created when emotion runs high and conviction runs low.
Whether this is the bottom or just another re-accumulation phase, the data point to one conclusion: Bitcoin remains the cleanest expression of global liquidity expansion and monetary debasement hedge in the digital age.
