Insights 
VT 
Bitcoin has slipped back under the key $100,000 level after setting a new all-time high near $126,000 earlier this year. The drop triggered one of the biggest liquidation cascades of the cycle, wiping out more than $1 billion in leveraged long positions in a matter of hours. Sentiment quickly flipped from greed to extreme fear, even though the news backdrop looked supportive: rate cuts, the end of quantitative tightening, fresh crypto legislation, and a growing ETF pipeline.
The result? A divided market. Some traders think the cycle top is already behind us, while others believe forced selling has created an opportunity. So is this the start of a long downturn, or just a harsh reset within a bigger, liquidity-driven bull cycle? Let’s break it down.
Why Did Bitcoin Drop?
1. Hidden Leverage Finally Burst
Bitcoin’s run to new highs attracted massive margin trading across futures markets. When the price stopped climbing, these leveraged positions became unstable. As Bitcoin slipped from $120K toward $100K, automatic liquidations kicked in, each one forcing more selling and creating a loop that accelerated the crash.
2. Money Rotated Into AI And Semiconductors
Global capital shifted into stronger themes, notably AI and semiconductor stocks, boosted by improving trade talks and strong earnings. These trades looked more compelling than speculative assets like crypto.
At the same time, crypto markets showed signs of exhaustion. Good news produced weaker reactions, while bad news hit harder. It’s a classic late-stage behaviour when buyers start to tire.
3. Macro Signals Haven’t Fully Caught Up
Policy is easing, but the economy hasn’t followed through.
Interest rates are coming down. Balance sheet tightening is ending.
But activity indicators that normally pop during a recovery, especially manufacturing, remain below 50.
Some macro analysts argue the market is in a stretched cycle: conditions improving ‘on paper,’ but not yet firing the growth engines that usually boost risk appetite. In this view, the liquidity wave that typically drives post-halving rallies has been delayed, not cancelled.
Who Is Selling This Time?
1. Institutions Taking Profit Through ETFs
After months of steady inflows, spot Bitcoin ETFs suddenly flipped to net outflows as large holders redeemed shares near the highs.
2. Long-Term Holders Moving Coins To Exchanges
On-chain data shows dormant coins, untouched for long periods, started moving. Some early adopters and long-term holders used high prices and ETF liquidity to take profit.
3. Miners Increasing Sales
With rising energy costs and uncertainty around future price levels, miners sold more newly mined Bitcoin, especially after key price supports broke.
4. Companies Reducing Treasury Holdings
Some corporates that accumulated Bitcoin during earlier phases trimmed holdings to service debt or strengthen balance sheets. Amounts aren’t massive, but still add supply at sensitive moments.
5. Leverage Washout: Over $1 Billion Liquidated
As price broke key technical levels, margin and futures longs were forcibly closed, over $1B in long liquidations, delivering the final flush that pushed BTC below $100K.
Stablecoin Supply Keeps Rising. Why Does That Matter?
Even as Bitcoin sold off, the total value of USD-pegged stablecoins climbed to record highs above $300B. Both USDT and USDC continue expanding supply.
This is important for two reasons:
1. Massive ‘Dry Powder’ Inside Crypto
A key metric, the Stablecoin Supply Ratio (SSR), is currently low. Historically, low SSRs happen near cycle bottoms, meaning there is a large pool of buying power relative to Bitcoin’s size.
If confidence returns, this stablecoin liquidity can move quickly into BTC and other assets.
2. Real-World Stablecoin Usage Is Growing
Stablecoins aren’t just sitting idle. They are increasingly used for:
– Payments and remittances
– Trading on decentralised exchanges
– Lending and yield
– Global dollar funding
Regulators have been tightening reserve rules and audits, which boosts trust. So stablecoin growth reflects real application and a large war chest that can return to risk assets once fear fades.
Bear Market Or Healthy Reset?
By textbook definition, Bitcoin meets bear-market criteria:
– Down more than 20% from the top
– Sustained move below the 200-day moving average
– On-chain cost-basis indicators rolling over
Historically, when these metrics fall below their 1-year averages, momentum tends to break, signalling either a deeper correction or the start of a longer downtrend.
Key Downside Levels Traders Are Watching:
$92K–$95K → retracement zone + futures gaps
Low $80Ks → weekly 100-SMA
Mid-$70Ks → prior consolidation area
These levels aren’t guaranteed, but represent plausible bearish scenarios.
The Case For A Mid-Cycle Reset
Despite the drop, the bullish argument is far from dead.
1. Excess Leverage Has Been Flushed Out
The system handled the washout without major failures of exchanges or stablecoins.
2. Stronger Hands May Be Accumulating
Forced selling often transfers coins from weak holders to long-term buyers.
3. Valuation Metrics Are Entering ‘Deep Value’ Zones
Bitget research highlights the MVRV ratio vs. its 365-day SMA. Historically, when MVRV falls below this line during an uptrend, Bitcoin has delivered large rebounds in the months that follow.
4. Macro Signals Point To A Delayed Liquidity Wave
– Activity surveys are still soft
– Rates are now moving down
– Liquidity is slowly improving
– Governments running huge deficits
– Central banks quietly support debt loads
This environment typically supports scarce assets like gold and Bitcoin. Gold’s recent strength suggests easier conditions are building. If the expected liquidity wave arrives, it may peak closer to 2026, not 2025.
What Could Push Bitcoin Higher Again?
1. Time And Stabilisation
Markets need time to digest forced selling. Once fear fades and supply dries up, even small positive catalysts can trigger a recovery.
2. Rising Global Liquidity
With quantitative tightening ending and rate cuts underway, the broader direction is toward easier financial conditions. Crypto historically thrives when liquidity expands.
3. Regulatory Clarity And New Products
Clearer rules for digital assets and stablecoins, the growth of spot ETFs, and potential new ETF approvals for large altcoins could open fresh inflow channels.
4. The Long-Term Scarcity Narrative
Bitcoin’s role as hard digital collateral remains intact. As more value moves onto crypto networks, Ethereum and high-speed chains included, network effects can boost underlying asset valuation. In a world of steady fiat debasement, scarce assets tend to outperform.
Final Thoughts
If the business cycle eventually accelerates and liquidity returns in force, this dump below $100,000 may be remembered as a painful but necessary reset. Not the end of Bitcoin’s long-term story.
