"The broader structure remains weak, but shifts in the U.S. dollar trend are becoming the key variable."
Following the latest pullback, Bitcoin's price structure has weakened further. The most visible signal is that it continues to trade below its 21-week moving average, consistent with a bear-market framework. At the same time, policy uncertainty associated with a U.S. midterm election year coincides with the fourth year of Bitcoin's typical four-year cycle — a period that has historically been associated with downside pressure. That said, against the backdrop of ongoing U.S. dollar weakness and a still-intact global reflation theme, we maintain a more constructive view on risk assets overall, while assessing Bitcoin more cautiously based on structural signals.
Price Structure Under Pressure: Losses Are Broadly Distributed, Not Institution-Driven
Over the past six months, Bitcoin has failed to keep pace with gold and other risk assets. Since June 2025, we have argued that persistent selling by legacy holders capped Bitcoin's upside and kept prices range-bound. However, the dynamics shifted materially in October, when gold accelerated higher while Bitcoin moved into a corrective phase, suggesting that a single explanatory factor is no longer sufficient to explain the divergence.
The October 10, 2025, flash crash marked an important inflection point. The episode created unusually wide dislocations in relative pricing — both across correlated assets and across the same assets trading at different prices on different exchanges — compressing the risk budgets of market makers and market-neutral funds and weighing on short-term liquidity. Notably, there has been little evidence of concentrated losses among major trading firms. Instead, realized losses appear to have been broadly distributed across market participants. Data show that traders on Hyperliquid accounted for more than 50% of realized losses, indicating that speculative retail traders absorbed the bulk of the damage rather than institutional market makers.
Capital Flows and Narrative Shifts: Dollar Weakness as a Support Variable, Risk Appetite Still Cooling
From a macro perspective, the global reflation theme remains intact, with the U.S. dollar continuing to trade in a weaker range. Historically, periods of sustained dollar weakness have tended to provide meaningful medium-term support for Bitcoin. By refraining from pushing back against recent dollar weakness, Trump has effectively signaled tolerance for further depreciation, which may continue to support reflation trades in the near term.
However, capital-flow indicators suggest that risk appetite has begun to turn more cautious at the margin. The rolling one-year growth rates of stablecoin supply for both USDT and USDC peaked around October 2025 and have since slowed materially, with the deceleration in USDC particularly pronounced. Meanwhile, overall Bitcoin search interest peaked in early 2021 and has remained depressed since, reflecting a sustained decline in retail attention rather than a resurgence of panic. While concerns around quantum computing have faded, the topic continues to represent a narrative overhang that weighs on Bitcoin's "safe-asset" perception and limits any recovery in its perceived security premium.
Overall, while the recent break in the U.S. dollar's 14-year uptrend represents a macro development that has historically been conducive to building medium- to long-term support for Bitcoin, the current price structure remains weak. Rallies continue to be sold, and price action still reflects consolidation within a broader bear-market framework. Although our view on Bitcoin has turned incrementally more constructive relative to late October, confirmation of a more decisively bullish stance will require further improvement in both technical signals and capital-flow dynamics.
