Original article from Galaxy
Compiled by / Odaily Planet Daily Golem (@web 3_golem)
Editor's Note: Galaxy originally sent this research report to its clients on October 22.The core view of the report is that it believes the bear market ended in June this year, and Bitcoin is currently in an "accumulation phase," a phase that has appeared before every previous rally.
From a technical perspective, the 200-week moving average has provided effective support, and the 50-week moving average has also been successfully reclaimed for five consecutive weeks; from a positioning perspective, short-term selling pressure has largely faded, and basis traders and macro speculators have cut their ETF and futures positions by more than half; Bitcoin's fundamental logic is also becoming more solid, as the U.S. is facing a $2 trillion fiscal deficit, and with Treasury yields at 5%, the possibility of currency depreciation is increasing.
In addition, the market narrative environment has turned for the third time toward "focusing on blockchain rather than Bitcoin" (the previous two sentiment shifts both occurred when the market was at a bottom). Therefore, Galaxy believes that now is a good time to buy and hold Bitcoin. The article also explains the conditions sufficient to trigger Galaxy to change its view.
The Simplest Indicator: When the Narrative No Longer Focuses on Bitcoin—Buy
At the end of last month, I attended the Korea Blockchain Conference. It was a wonderful conference that fully demonstrated South Korea's growing interest and huge market potential in the digital asset space. Despite the enthusiasm on site, the core theme of the event was very clear: a "great convergence" is taking place between digital assets and traditional capital markets. Dozens of panel discussions were held during the conference, covering tokenization, RWA, stablecoins, and upgrades to payment infrastructure. I participated in one of the discussions focused on Bitcoin and the crypto asset market.
This reminded me of the Consensus conference held in New York in 2018, when the venue was full of suit-wearing people from the three major consulting firms, who were eager to talk about enterprise blockchain, such as R3's Corda and IBM's Hyperledger. After Bitcoin's price experienced a crazy surge and subsequent sharp pullback in 2017, the market direction shifted dramatically, and people stopped focusing on Bitcoin and cryptocurrencies, turning their attention instead to the more mature and safer concept of blockchain technology.
From 2015 to 2016 (when another deep bear market trough was underway), I worked at Fidelity and observed similar sentiment. At that time, no one wanted to talk about Bitcoin, but bankers flocked to blockchain. At that time, influenced by the Silk Road incident and the ICO boom, and because the underlying technology itself indeed had practical value, financial institutions moved away from concepts such as bearer assets, censorship resistance, and permissionlessness, and turned toward more "respectable" areas.
Of course, Bitcoin and cryptocurrencies did not die, but as is the case today, people's focus had shifted significantly away from the core spirit of decentralization and toward a less revolutionary concept, namely upgrading the technological architecture of the financial system.
Although Wall Street's efforts to embrace blockchain in 2016 and 2018-2019 did not achieve significant results, the situation this time is likely to be different. Today, institutional acceptance of digital assets and blockchain technology is an indisputable fact, and this is likely to lead to a more efficient financial system. Even so, we should not forget the concept of "non-sovereign, censorship-resistant hard money," because it will never disappear.
Technical Perspective: Bitcoin Has Bottomed
In Bitcoin bear markets, there is a reliable reference indicator: the 200-week moving average forms "bottom" support, while the 50-week moving average forms "top" resistance.
Bitcoin's price fell below the 50-week moving average in the week ending November 16, 2025, and then remained below that average for 44 weeks. The low in June touched the support of the 200-week moving average and successfully held it, with the worst weekly close only 4.7% below the 200-week moving average (by comparison, this figure was 1.4%, 2.8%, and 32% in 2015, 2018, and 2022, respectively).
In the week ending September 20, 2026, Bitcoin's price closed back above the 50-week moving average; by the week ending October 18, it had closed above that average for five consecutive weeks. In every complete bear market since 2011, after Bitcoin touched a low, it often began a sustained move back above the "top" resistance level (see chart below).
How often does Bitcoin experience a new round of downside momentum after a rebound? Since 2011, there have been 13 cases of rebounds (i.e., moving back above the average from below it), and based on the length of time prices stayed below the average, these cases showed different subsequent trajectories.
In 4 of these cases, prices remained below the average for more than 20 weeks. In the following year after these 4 rebounds, prices never fell more than 8.4% below the re-entry level; one year later, Bitcoin had risen by 1,497%, 128%, 55%, and 142%, respectively; within 33 to 83 weeks, prices revisited their previous all-time highs.
In the other 9 cases, Bitcoin's price remained below the average for no more than 14 weeks, and in 7 of those cases, the decline exceeded 25% in the following year. The September "return" above the average ended the previous 44-week "low-level operating period" (see chart below). This forms a pattern.
The four-year cycle theory also confirms this. In the previous three cycles, Bitcoin hit lows on the 777th, 889th, and 912th days after the halving, respectively; the low so far in this cycle occurred on the 802nd day. Based on this day count, in previous cycles, the price gains from low to the next peak were 87x, 19x, and 7.6x, respectively. Although the multiple has been decreasing in each cycle, the directional pattern of price movement has not failed.
This cycle is the smallest drawdown bear market in history (-53%, compared with -93%, -85%, -84%, and -77% in previous bear markets). This is also the first bear market in which prices never fell below the network cost basis throughout the entire process, with a market cap to realized value ratio of 1.10, compared with 0.56, 0.69, and 0.75 at the lows of the previous three cycles.
The average cost of the coins that drove Bitcoin's rebound from $58,525 was $74,811, and prices first recovered above that cost basis on August 19. As of October 22, holders of these coins were up 9%, with a spent output ratio of 1.009 and no profit-taking, consistent with a typical accumulation phase.
In addition, the selling forces that formed resistance at the 2025 high are weakening.
In 2024, bitcoin that had not moved for five years or more had an average monthly turnover of 67,000 coins, compared with 47,000 coins in 2025. Since October 2024, the total turnover of such "old coins" has reached 1.11 million coins, the largest distribution in any cycle, most of which has been absorbed by spot ETFs and DAT companies holding bitcoin. In 2026, this turnover rate fell to 34,000 coins per month, only 50% of the 2024 level.
Market holdings: "Fast money" has left, long-term holders remain
Futures market data shows that macro investment funds currently hold a very low proportion of bitcoin positions.
According to financial futures trader data from the U.S. CFTC, in the week bitcoin prices hit an all-time high, asset management institutions held a net long position of 43,300 coins in CME bitcoin futures, which has now fallen to 18,400 coins (a decline of 57%); leveraged funds' net short positions (i.e., the futures portion of spot ETF cash-and-carry trades) also shrank from 74,100 coins to 30,600 coins; and total open interest denominated in U.S. dollars fell by 51%.
The arbitrage yield supporting these short positions has almost completely disappeared. In the 30 days before bitcoin hit its all-time high, the annualized average basis of the front-month contract was 7.9%, 3.9 percentage points higher than the 3-month Treasury yield; in the 30 days ending October 21, the basis was 4.8%, only 0.6 percentage points higher than the Treasury yield.
At the far end of the futures curve, although some yield can still be obtained, arbitrage traders cannot fully capture these gross yields. ETF management fees, monthly roll costs, and margin that must be held at the clearinghouse consume about 1 percentage point of yield, leaving traders with perhaps only about 1.5 percentage points of excess return (relative to spot). By comparison, at the time prices hit an all-time high, the same calculation could produce about 3 percentage points of excess return, and if one looked only at the 9.8% annualized yield offered by the front-month contract at that time, the return would be even greater.
Once the financing cost of long positions is set at SOFR (Secured Overnight Financing Rate) plus a spread, the additional return that leverage can bring becomes minimal. And after deducting financing costs, the remaining return cannot even cover the tail risk this trade may face, such as the basis inversion in December 2022, when the annualized magnitude reached -31% (as shown in the chart above).
It is this economics, rather than the bitcoin price itself, that led to the departure of multi-strategy trading teams.
Macro speculators reduce holdings, long-term funds buy
13F filings from asset management institutions reveal the situation of many institutional sellers, mainly including institutions engaged in basis trading and macro speculators. As of September 30, 2025 (the last quarter-end before the price peak appeared), reporting institutions held spot ETF positions equivalent to 355,000 bitcoin; by June 2026, this number had fallen to 307,000 coins (a decline of 14%).
This reduction came almost entirely from multi-strategy funds, macro funds, basis trading desks, and bank proprietary trading desks, which had previously used ETFs for arbitrage or momentum trading.
Nine institutions—Millennium Management, Brevan Howard, Goldman Sachs Group, Capula Management, Farallon Capital, D. E. Shaw, Schonfeld Strategic Advisors, Symmetry Investments, and Tudor Investment Corp—reduced their holdings by between 29% and 100%, cutting a combined 68,000 bitcoin. This exceeds the total reduction of 48,000 bitcoin across all 2,200 reporting institutions; therefore, apart from the nine institutions above, all other reporting institutions increased their holdings in aggregate.
Wealth management platforms and sovereign wealth funds took over the shares sold by these speculators. In addition, among groups not required to file 13F reports (including investment advisers, family offices, and individual investors), holdings fell by only 6.6%, while bitcoin prices fell by as much as 49% over the same period.
ETF holdings fell 11% from peak to trough, while bitcoin prices fell 53%. Since the June low, ETF holdings have increased by 87,000 bitcoin, while leveraged funds' short positions have decreased. This indicates that capital flows are more inclined toward directional buying rather than arbitrage trading, which may also explain why the panic sentiment in the market this year did not trigger bitcoin selling.
Fundamentals: AI Investment Accelerates Currency Debasement, Bitcoin Will Ultimately Appreciate
As of October 20, 2026, total U.S. federal debt had reached $40.44 trillion, up from $23.2 trillion at the start of 2020; at the end of fiscal year 2026, the fiscal deficit was $1.99 trillion, or 6.2% of GDP, and the government's annual interest expense was as high as $1.28 trillion.
The bond market has already begun to react to this. On October 5, 2026, the 10-year U.S. Treasury yield reached 5.31%, a new high since 2007; on September 16, 2026, the Federal Reserve raised interest rates to the 3.75%–4.00% range, when CPI inflation was 3.7% and M2 money supply growth was 5.7%.
When a sovereign nation faces a 6% fiscal deficit while also needing to refinance $40 trillion in debt at a 5% interest rate, the pressure to dilute the debt through inflation will steadily increase. Historical experience also confirms this trend: whenever pressure arises, central banks always return to the market as the "buyer of last resort," just as happened in 2020 and in March 2023.
AI infrastructure construction is often seen as a competitor to Bitcoin in the competition for capital, but it is itself also a "currency debasement machine."
Morgan Stanley expects that AI-related debt issuance will reach $570 billion in 2026; by 2028, about $1.5 trillion of AI infrastructure construction will need to be resolved through external financing. If this investment ultimately materializes, then it is in fact financed through credit expansion; if it fails, the losses will be socialized, that is, borne by society as a whole. Either way, the supply of claims (or rights) on the future is growing, so the value of a hard-currency asset with a fixed issuance (Bitcoin) will certainly rise along with it.
This fundamental logic is older than any interest rate cycle. People's demand for money that cannot be frozen, cannot be surveilled, and cannot be tampered with will grow as the ability to carry out such interventions increases, and AI is precisely what makes these interventions extremely cheap.
Tokenized deposits and stablecoins were designed from the outset with backdoors that allow them to be frozen, whereas Bitcoin is the only holder asset of a certain scale that has no issuer. As the financial system moves toward programmable money, people's demand for this kind of "escape hatch" is also constantly rising.
Market Sentiment: The Third Time Market Sentiment Has Turned to "Blockchain, Not Bitcoin"
Previously, mainstream finance embraced blockchain technology but rejected Bitcoin as an asset.
Between 2015 and 2016, with the establishment of the banking industry's R3 consortium and The Economist magazine publishing a cover article titled "Trust Machine," "blockchain, not Bitcoin" became the mainstream accepted view at the time. During that period, Bitcoin's weekly closing price once fell to a low of $231, and the subsequent cycle high rose 83 times from that level.
Between 2018 and 2019, the mainstream narrative shifted to "blockchain, not cryptocurrency." JPM Coin and Libra emerged one after another, while Bitcoin was regarded as thoroughly finished at the time, with its price falling to $3,195, and the subsequent cycle high rose 20 times from that level.
In 2026, the market evolved into "stablecoins and tokenization, not Bitcoin." Banks are piloting tokenized deposits, the CLARITY Act failed to pass a procedural vote, and AI has fully taken over the dominant market growth narrative. Whenever market sentiment swings to this extent, Bitcoin is often less than a year away from its cycle low.
This trend in 2026 is already reflected in the data. The U.S. dollar has moved on-chain, and since the start of 2024, the scale of stablecoins in circulation has grown 129% to $304 billion. At the same time, Bitcoin, the asset that these on-chain infrastructures were originally designed to settle, is still one-third below its high. This shows that the funds are merely staying within the system rather than truly flowing out of it.
Search indices also confirm this state of "being neglected." On October 13, 2026, Google searches for the word Bitcoin fell to their lowest level in years; the Fear and Greed Index was 71 at the October high, fell to 5 in February 2026, and was 15 at the June low; ETF fund flows this month were flat.
But with no one paying attention, the Bitcoin price has already been rising. This is a market that has been overlooked, has low positioning, and is rising.
Risks
The Bitcoin price may still fall further, possibly due to a major drawdown in global markets, for example under the influence of "AI anxiety" or geopolitical events, and the Bitcoin price may also come under pressure.
But based on the data above, in the past four instances when Bitcoin remained below its 50-week moving average for an extended period and then later returned above that average, the worst subsequent closing price fell 8.4% from the level at the time it returned above the average, and in addition each bear market decline was shallower than the previous one.
Therefore, if Bitcoin's weekly closing price once again falls below the 50-week moving average ($76,540) and fails to recover above that average within a month, it would indicate that this rebound has failed. Macro investors have relatively light Bitcoin positions, which also helps cushion the impact of broader market risks, thereby reducing the risk of a major Bitcoin drawdown caused by a broad market correction.
The risks brought by AI are mainly in three aspects: competition for capital, AI-driven hacking and social engineering, and the bursting of the AI bubble dragging down risk assets.
But none of the above risk losses touched the Bitcoin protocol itself; they only involved exchanges, vendors, hardware devices, or individual users. The current AI infrastructure buildout relies on debt financing and tax subsidies, which further widens fiscal deficits and instead highlights the value of Bitcoin's "fixed supply." In addition, AI has not weakened the SHA-256 algorithm or existing signature schemes. If the AI bubble bursts and forces the Federal Reserve to intervene, this precisely confirms Bitcoin's fundamental logic rather than negating it.
The market also has concerns about quantum computing. Currently, 7.1 million bitcoins (35% of the total supply) are stored in output addresses whose on-chain public keys have been exposed.
There is currently no cryptographically relevant quantum computer (CRQC). The largest elliptic curve key broken on quantum hardware is only 15 bits, while Bitcoin uses 256-bit keys. Google's most advanced chip currently has 105 physical qubits, and according to a paper published by Google itself in March 2026, the number of physical qubits required to achieve a break would need to reach at least 500,000.
Although the risk does exist, it has been recognized by all parties and related work is underway. This work has also received funding support: a quantum-resistant output type (BIP-360) was merged into the Bitcoin protocol in February 2026; Galaxy's Bitcoin Quantum Readiness Initiative has committed up to $5 million; and the Bitcoin Security Alliance, composed of nine institutions, has also committed $15 million over three years.
The systems used by all banks face the same urgency, and Bitcoin's migration process is likely to become the most advanced and best-funded among them.
Factors that could change the bullish view
Our view could change if the following occur:
A weekly close below the 50-week moving average ($76,540) that is not reclaimed within a month; spot Bitcoin ETF holdings falling below the July 13 low of 1.22 million coins; a clear, time-bound path toward the emergence of a cryptographically relevant quantum computer; or the United States implementing fiscal austerity.
None of the above signs have appeared so far, so we believe Bitcoin's market bottom has formed, selling pressure has weakened, the currency debasement logic has further strengthened, and the speculative crowd has left the market—all of which are reasons for us to remain bullish on Bitcoin.
Bitcoin has previously proven its ability to rise to at least $125,000, and it has every reason to return to that price level, and the current market setup is also quite favorable.
