TL;DR
- VanEck qualifies Bitcoin’s October drop as a “mid-cycle reset” and not a bear market.
- Global M2 growth, a key driver of BTC’s price, has increased by 6.8% this year.
- Analysts note that leverage has normalized and on-chain activity is increasing.
In a recent market report, analysts from the investment management firm VanEck, Nathan Frankovitz and Matthew Sigel, assured that Bitcoin’s October pullback is not the beginning of a bear market. Instead, the firm qualifies it as a “liquidity-driven mid-cycle reset.”
Despite Bitcoin currently trading 14% below its all-time high and having failed to recover from a record leverage flush earlier in the month, VanEck’s analysis suggests that the Bitcoin bull market remains intact.
According to the analysts, key indicators now show signs of stabilization and health. “Leverage has normalized, on-chain activity is rising, and the macro role of digital assets continues to strengthen,” they detailed in the report.
They noted that with leverage now at the 61st percentile and Bitcoin prices near one-year lows relative to gold, the current scenario aligns much more with a mid-cycle correction than with the start of a prolonged bear market.
Global M2 Growth Drives the Bitcoin Thesis
The VanEck report identifies the growth of the global M2 money supply as a fundamental factor, stating that it explains more than half of Bitcoin’s price variance, reinforcing its narrative as an “anti-money printing” hedge asset.
Furthermore, data from MacroMicro indicates that the global M2 supply has grown by 6.8% since the beginning of the year, indicating that central banks are continuing with monetary expansion globally. In addition to M2, VanEck identified global liquidity and on-chain activity as key influential factors.
The analysis also highlights that nearly 73% of Bitcoin’s price variance since October 2020 can be explained by changes in futures open interest.
Likewise, the strong correlations between revenues generated on the blockchain and token prices demonstrate real and growing adoption. VanEck concluded that it “was not willing to bet against Bitcoin” while fiat money debasement accelerates.
The firm argues that, given Bitcoin represents ~2% of the global money supply, “owning less than ~2% Bitcoin or other digital assets is implicitly expressing a short position on the asset class.” Although other analysts agree that the Bitcoin bull market remains intact, they also warn, like investor Ted Pillows, that considerable short-term volatility is still expected.
