According to BCA Research, Bitcoin’s dramatic early-December turnaround is paving the way for the market to return to macro drivers after a phase characterized by forced deleveraging and micro-level stress.
Bitcoin Drop Driven Speculation
According to a research released on Thursday by BCA strategists headed by Artem Sakhbiev, the recent drop was more about the removal of excess speculation than it was about a shift in fundamentals.
The move started with a 10% decline into the Monday open before rising back over $90,000. BCA attributes this trend to a sequence of localized shocks rather than changes in yields or risk appetite.
The company cites several significant drivers, including S&P Global’s downgrading of Tether, MicroStrategy’s hint that it would sell Bitcoin, and increased pressure from China’s crypto crackdown.
Crypto Sentiment Weakens Sharply
Sentiment immediately faded, according to positioning data. A record $19 billion in long bets were liquidated in October, and the “market-value-to-net-asset-value ratio” for Bitcoin treasury corporations fell below 1, suggesting a bleak future.
Along with a decline in the crypto Fear and Greed Index to levels last seen during the 2022 crypto winter, strategists also point to the percentage of supply in profit dropping to 65%, the lowest since late 2023.
The team contends that the asset is once again ready to “re-anchor to macro dynamics as institutional demand continues to increase” now that leverage has been significantly reduced. They claim that the long-term story is still in place.
Bitcoin Seen As Insurance
While Bank of America has recommended a 1-4% crypto investment for wealth-management customers, Vanguard has started to permit cryptocurrency allocations on its platform. According to BCA’s Global Asset Allocation Strategy, consistent inflows have helped stabilize volatility over time, and ETF flows have once again become positive.
According to BCA, Bitcoin still serves as a kind of “global wealth’s insurance asset,” taking advantage of its restricted supply and rising demand as global wealth increases. Another indication of a strong demand for alternative deposits is the strong performance of gold and silver.
However, there are still short-term hazards, especially after Bitcoin dropped below important technical support. However, according to BCA, the price is still above the True Market Mean, which is the cost basis of active investors, indicating that the larger upswing is still going strong.
Bitcoin Rated Overweight Again
On December 1, the company raised Bitcoin to overweight, seeing any drop below $90,000 to be a desirable entry position for long-term investors.
The report’s analysts said, “With excess speculation being flushed out and the fundamental bull case unaltered, present levels are again proving appealing – especially for investors with a favorable risk view.”
Additionally, they point out that Bitcoin’s recent poor performance in comparison to gold seems excessive. The BTC/gold ratio fractal indicator now “suggests enhanced probabilities of a reversal,” which supports a strategic long position in that spread.
