Matrixport Research: Bitcoin Falls into Bear Market Territory, Could a Weakening Dollar Become the Next Pivot?

Following the latest round of pullback, Bitcoin's price structure has further weakened. The most direct signal is that it continues to trade below the 21-week moving average, aligning with the technical characteristics of a bear market range. Concurrently, the policy uncertainty typical of a U.S. midterm election year, combined with the cyclical overlap of Bitcoin's typical four-year cycle, makes this historical time window more prone to price pressure. However, against the backdrop of a weakening U.S. dollar and the persistence of the reflation narrative, we maintain a relatively positive outlook on overall risk assets. Yet, our view on Bitcoin still requires cautious evaluation in conjunction with structural signals.

Price Structure Under Pressure: Selling Pressure Not from Institutions, but Dispersed Speculative Losses

Over the past six months, Bitcoin has failed to strengthen in sync with gold and other risk assets. Since June 2025, sustained selling by early holders was once considered the primary suppressing factor. However, starting in October, as gold accelerated its upward move and Bitcoin entered a correction, it became clear that a single factor could no longer explain the current divergence.

The flash crash on October 10, 2025, served as a significant watershed. This event led to a notable widening of cross-asset relative pricing and inter-exchange price spreads, squeezing the risk budgets of market makers and market-neutral capital, thereby weakening short-term liquidity. It is noteworthy that there is little indication of concentrated losses among major trading institutions. Instead, realized losses are occurring more diffusely among a broader range of market participants. Data shows that traders on the Hyperliquid platform contributed to over 50% of the realized losses, indicating that this round of shock was primarily borne by speculative retail investors rather than being institution-led.

Capital and Narrative Shifts: Weakening Dollar is a Supporting Variable, but Risk Appetite is Still Cooling

On a macro level, the reflation narrative persists, and the U.S. dollar remains within a relatively weak trading range. Historically, Bitcoin has often found more robust medium-term support during periods of sustained dollar weakness. Recently, Trump has neither sent a clear signal of support for a weaker dollar nor made strong statements against it. The market tends to interpret this as an increased tolerance for a weaker dollar, suggesting that the reflation trade may still find support in the short term.

However, from a capital flow perspective, there are signs of a marginal shift towards caution in risk appetite. The one-year rolling growth rates of the stablecoin supplies for both USDT and USDC have noticeably slowed after peaking around October 2025, with the decline in USDC being more pronounced. Meanwhile, Bitcoin's overall search interest has remained at low levels since its peak in 2021, reflecting more of a cooling in retail attention rather than a resurgence of panic. Although discussions related to quantum computing have subsided, they continue to somewhat suppress Bitcoin's "safe-haven asset" narrative, making it difficult for its safety premium to recover.

Overall, while the U.S. dollar's 14-year uptrend has been broken—a change historically favorable for Bitcoin establishing medium-to-long-term support—the current price structure remains weak, with rallies often being sold into. The asset continues to trade within a consolidation range under a bear market framework. Our view on Bitcoin has shifted marginally towards a more constructive stance compared to before. However, before adopting a more definitive bullish stance, we still need to wait for further improvement and confirmation from both technical and capital flow signals.

Some of the views above are from Matrix on Target. Contact us to obtain the full Matrix on Target report.

Disclaimer: Markets are risky; invest with caution. This article does not constitute investment advice. Digital asset trading can carry significant risk and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions based on the information provided herein.