‘Does not feel like a cycle-peak’: Bernstein says bitcoin’s 25% slide reflects short-term correction

Bitcoin’s approximate 25% drop from its Oct. 6 all-time high of around $126,000 marks a short-term correction rather than the start of a major downturn, according to analysts at research and brokerage firm Bernstein.

In a note to clients on Monday, the analysts led by Gautam Chhugani said the decline reflects investor anxiety around the historical four-year cycle pattern — which previously saw peaks in 2013, 2017, and 2021 — with many investors pre-emptively selling into fourth-quarter weakness due to the belief that 2025 will follow suit, creating somewhat of a self-fulfilling prophecy.

However, they argued that the current backdrop is fundamentally stronger, countering that the evidence instead points to “a relatively shallow correction” into a new local bottom and not the historical 60% to 70% drawdown seen in previous cycles — supported by significant absorption of long-term holder supply. Roughly 340,000 BTC — about $38 billion — sold by holders with at least one-year tenure over the last six months has been largely absorbed by approximately $34 billion of inflows into spot ETFs and corporate treasuries, they noted.

Bitcoin is now trading flat for the year, but remains up about 100% over the past three years, according to The Block’s BTC price page.

‘Does not feel like a cycle-peak’

Institutional ownership of bitcoin ETFs rose from 20% at the end of 2024 to 28% currently, with total ETF assets under management reaching $125 billion despite $3 billion of outflows in the last three weeks, the analysts said. This shift, they argue, reflects “higher quality and consistent ownership,” reducing the likelihood of a deeper sell-off.

Bernstein also addressed market concerns that Strategy (formerly MicroStrategy) — which is now trading near its bitcoin asset value — may have to liquidate some of its bitcoin if prices keep falling. The analysts highlighted that Strategy’s management has confirmed it is not selling or intending to sell a single bitcoin, adding that the firm’s leverage remains conservative at $8 billion of debt against $61 billion in bitcoin holdings, and dividends are “well covered” by its treasury and its ability to access further capital via its at-the-market programs. “We expect Strategy to continue buying more bitcoin through this market correction,” they said.

Further structural tailwinds remain intact, the analysts continued, citing strong political support for crypto under the Trump administration as a strategic priority, expectations for Clarity Act market structure legislation to advance by late 2025 or early 2026, and a favorable liquidity environment as rates decline. 

Crypto-equity performance in the third quarter — with Coinbase, Robinhood, Figure, and Circle all beating estimates — also signals robust institutional engagement in tokenization and stablecoins, they said, framing them as the “two mega trends of this crypto cycle.”

Looking ahead, the analysts argued that the market “does not feel like a cycle-peak” but rather part of a multi-year trend defined by institutional participation and recurring, moderate corrections. They are watching whether bitcoin can establish a bottom near the $80,000 range seen after last year’s U.S. presidential election and argue the current pullback may offer an attractive entry point across digital assets and digital asset equities. 

Gautam Chhugani maintains long positions in various cryptocurrencies.

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