Bitcoin market fears are overblown as policy shifts open medium-term upside, K33 says

While bitcoin is enduring its steepest correction since the 2022–23 bear market, the current wave of fear is being driven by exaggerated long-horizon risks rather than any immediate structural threat, according to K33.

In its December Outlook, the research and brokerage firm’s Head of Research, Vetle Lunde, argued that bitcoin is trading at “deep value” relative to equities and that the case for material upside is far more plausible than a repeat of the 80% drawdowns seen in prior cycles.

Lunde pointed to derivatives excess, concentrated selling from long-term holders, and broad supply distribution as the catalysts that pushed the market to its recent lows.

According to K33, sentiment deteriorated sharply through November as ETF holders also turned into “huge net sellers” and traditional finance participants stepped back, leaving bitcoin at its weakest level relative to the Nasdaq since November 2024. Positive catalysts failed to gain traction, Lunde noted, as market participants “scrambled for reasons to sell” in an environment where speculators had exhausted cash reserves while veteran holders positioned defensively.

The report highlighted three recurring fear narratives that have dominated recent headlines but, in Lunde’s view, are ultimately problems “many years into the future.”

Firstly, on quantum computing risk, Lunde said that while around 6.8 million BTC could theoretically be vulnerable if powerful enough machines emerged — referring to coins whose public keys are already exposed onchain — the timeline for such breakthroughs remains uncertain, and exchanges are unlikely to allow compromised coins to circulate freely. For now, he argued, the issue warrants developer coordination, not panic selling.

A second concern has centered on whether Strategy might be forced to sell bitcoin to support its share price. Lunde acknowledged that while Michael Saylor has opened the door to potentially selling some of its bitcoin to meet obligations if challenging market conditions persist, nothing indicates an actual intent to do so, pointing to the company’s recent $1.44 billion U.S. dollar reserve raise, which provides 21 months of dividend runway. Any potential forced sales, he said, remain far away and do not justify near-term fear.

The third fear narrative involves Tether’s reserve backing. While the stablecoin issuer holds “unconventional” reserves, including gold and bitcoin, Lunde emphasized that Tether earns $500 million per month from U.S. Treasury yields, has $7 billion in excess equity over its $184.5 billion stablecoin liabilities, and a further $23 billion in retained earnings. With nearly 80% of reserves in low-risk instruments, he sees no indication of a near-term liquidity event or forced bitcoin selling by the company.

Policy and structural developments

K33 instead points to a cluster of medium-term policy and structural developments that could materially strengthen bitcoin’s outlook. By February 2026, U.S. regulators must deliver new 401(k) guidance enabling crypto exposure in a $9 trillion retirement market. The Clarity Act is also expected to pass in the coming months, potentially accelerating tokenization and bank-led collateral use, the analyst said. Furthermore, a “pro-crypto dove” could soon lead the Federal Reserve, lowering the cost of capital and supporting discussion around a Strategic Bitcoin Reserve, he added.

With bitcoin near major support zones, Lunde concluded that upside potential is far greater than the long-term risks currently dominating sentiment as he opts for “long and bold” exposure.

Last week, Lunde argued that bitcoin was a “strong relative buy” with the sell-off nearly saturated. After substantial volatility in the $85,000 to $92,000 range in recent days, the cryptocurrency subsequently rebounded back above $94,000 at one point on Wednesday to reach its highest level in two weeks. Bitcoin is currently trading for around $93,570, according to The Block’s BTC price page.

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