Asset management giant VanEck described the recent Bitcoin price drop as a “liquidity-driven mid-cycle correction” in its Bitcoin ChainCheck report published in mid-October.
According to the company, strong fundamentals, increasing adoption rate, and on-chain data indicate that the Bitcoin market is maturing.
VanEck included the following statements in his report:
Bitcoin's October pullback is a 'mid-cycle reset' driven by tightening global liquidity conditions. Leverage ratios are returning to normal, on-chain activity is increasing, and the macroeconomic role of digital assets continues to strengthen.
The company also shared its three key findings for the source of Bitcoin price movements:
- VanEck noted that global M2 money supply growth explains more than half of Bitcoin's price movements, noting that Bitcoin continues to function as a hedge against money printing. The prominence of price discovery during Asian trading hours suggests that regional liquidity crunch is increasing short-term volatility.
- Futures open interest peaked at $52 billion in early October, and subsequent liquidations caused Bitcoin to lose approximately 18% of its value. According to VanEck, leverage has now returned to normal levels, and prices are trading at year-lows relative to gold. Therefore, the firm views this as a mid-cycle correction, not the beginning of a bear market.
- Bitcoin reached an all-time high of $125,000 on October 6 before falling to $105,000 on October 10. The 30-day average price is up 2% month-over-month.
VanEck attributed this decline to US-China trade tensions, high leverage levels, and profit-taking by large investors.
*This is not investment advice.
