21Shares: Bitcoin has not entered a deep bear market; volatility and consolidation may persist until the end of the year

ChainCatcher reports, Maximiliaan Michielsen, an analyst at crypto asset ETP issuer 21Shares, analyzed that the drop in bitcoin price below $100,000 has sparked concerns about a bear market, but this analysis believes the decline is a short-term correction rather than the start of a deep or prolonged bear market. Although volatility and consolidation may persist until the end of the year, the fundamental factors driving this cycle remain solid, supporting its long-term positive outlook.

The recent weakness in bitcoin is mainly influenced by three factors: forced liquidations, large bitcoin holders selling off and ETF capital outflows, as well as liquidity tightening triggered by macro events.

Since October, the market has experienced a total deleveraging process of $32 billions, including $3 billions in liquidations over the past week. Large investors have also been taking profits, selling about $12 billions worth of bitcoin since October. Meanwhile, spot bitcoin ETFs saw an outflow of $866 million last Thursday, marking the second highest single-day outflow on record. In addition, the US government shutdown led the Treasury to withdraw about $150 billions in cash from the financial system, exacerbating liquidity tensions.

Nevertheless, there are still positive signals in the market. The selling pressure from long-term investors has significantly eased, and assets are being transferred to new, more stable holders. At the same time, liquidity conditions are expected to improve, with US quantitative tightening anticipated to end in December and government spending set to resume. Furthermore, the global money supply continues to expand, which typically supports bitcoin. In the macroeconomic context, investors' demand to hedge against fiat currency depreciation is increasing, enhancing bitcoin's appeal as a store of value.

Although bitcoin has technically entered a short-term bear market, the analysis suggests this decline is more of a valuation reset rather than a deep bear market with a drop of over 80%. Importantly, none of the classic bear market catalysts are present: there are no security defaults, systemic fraud, regulatory shocks, or macroeconomic tightening cycles. Historical data shows that corrections of this magnitude usually end within 1 to 3 months and often mark a consolidation phase before the next rally. In the long term, bitcoin's fundamentals remain solid, and the outlook is still constructive.