Bitcoin’s latest pullback reflects a combination of tightening liquidity, fading rate-cut expectations and a normal cyclical correction rather than a breakdown in long-term fundamentals, according to crypto analysts.
At its seven month low, Bitcoin has fallen below the average cost basis of US exchange-traded fund investors for the first time since launch, marking a psychological turning point as the cryptocurrency extends losses beyond 30% from its October highs.
The average entry price across all Bitcoin ETF inflows sits at approximately $89,600, a threshold the cryptocurrency breached on Tuesday, according to Glassnode.
Speaking with Yellow.com, market observers say the pullback reflects broader economic conditions rather than crypto-specific deterioration.
Danny Nelson, research analyst at Bitwise Asset Management, attributes the decline to a confluence of macro pressures. "Confidence is waning that the Fed will cut interest rates in December. The government is well past-due on delivering key economic indicators. Meanwhile, headlines decrying an AI bubble are everywhere," Nelson said.
He noted that crypto remains largely viewed as a risk-on investment, making it more susceptible to short-term corrections when uncertainty rises. "It's a skittish investing environment, and such a mood inevitably produces skittish investors."
Nelson also flagged contracting stablecoin supply as a bearish signal for liquidity. "If traders are shifting their capital offchain, then they're not exactly rushing to buy, sell, borrow or lend crypto assets. Fewer stablecoins sloshing around means less liquidity across the entire ecosystem."
Despite near-term headwinds, Nelson emphasized that institutional interest remains robust.
"The fundamental setup for crypto heading into 2026 is incredible. Bitcoin, stablecoins, tokenization—these are all topics we spend every day engaging with investors on. And the majority of those investors view a pullback in the market as a gift,” he further said.
Bill Barhydt, CEO of Abra, framed the correction as typical volatility within a structural bull market.
"Over the last several years we have seen several price corrections of 25 to 35% for Bitcoin and 50-80% for other major digital assets. This is normal even in a bull market," Barhydt said.
He suggested the selloff may be nearing exhaustion. "When sentiment is this negative during a structural bull market it usually means we're nearing a short-term bottom and market volatility is coiling for a major move higher."
Barhydt also pointed to a structural shift in bitcoin's holder base.
"Bitcoin's so-called 'IPO moment' via ETFs and treasury companies has caused a partial rotation from long-term holders to newer holders similar to what happens after an IPO lockup expires. This is also equivalent to the winding up of a 'market rubber band' preceding a major move higher,” Barhydt said.
He maintained a bullish long-term outlook, saying that Bitcoin is still going to $1 million over the next four years in our opinion as global governments start providing significant stimulus to a weakening economy and start refinancing covid-era debt.
Nicholas Roberts-Huntley, CEO and co-founder of Blueprint Finance, echoed the view that bitcoin is now behaving like a traditional risk asset.
"Bitcoin is moving like a classic risk asset right now; there are no longer just crypto-specific factors driving it. Tightening liquidity, higher interest rates, and slower economic growth are all creating economic headwinds,” he said.
Roberts-Huntley emphasized that bitcoin's correlation with macro conditions represents maturation, not weakness.
"This is a market that's learning to price macro risk. Investors are treating it more like a traditional asset, reallocating capital in response to Fed signals, market sentiment, and risk appetite and that's a healthy sign for long-term stability,” he added.
He said that the underlying structural narrative remains intact. "Supply remains capped, adoption continues, and institutional flows are just shifting around."