Crypto Plunge May Be Temporary—Macro Signals Point to Imminent Upside

• Despite heightened fear among traders, some crypto market analysts see the correction as short-term, anticipating macroeconomic shifts to support a future bull run.
• The fixed supply of Bitcoin, alongside rising institutional interest and ETF inflows exceeding $45.29 billion, highlights its growing adoption.

The cryptocurrency market began to decline in the early hours of the trading session on Friday, with Bitcoin (BTC) price losing over 3.2%. Ethereum (ETH) and Solana (SOL) were not left behind as they registered losses of about 9% and 10%, respectively. The crypto futures liquidations reached $1.2 billion as investors responded negatively to the pressure and slide of the market.

Expert Expects Crypto Market to See Future Drop

Bitcoin dipped below $104,000 momentarily today, a decline that further increased the intensity of fear among traders in the crypto market. However, amidst the bearish movement, not all market analysts are bearish. They noted that the correction might be a short-term one, and the macroeconomic conditions might trigger another bull run.

HashKey Capital partner Han Xu finds reasons for hope in the present turmoil. He attributes potential upward momentum to an anticipated shift in the global liquidity environment, particularly the expected conclusion of the Federal Reserve’s quantitative tightening (QT) cycle.

QT is the strategy of the U.S. central bank to contract the money supply by shrinking its balance sheet by selling bonds, which is a policy that increases interest rates and constrains liquidity. However, the latest indicators show that this tightening cycle could be approaching an end.

Also, future regulatory changes to the Supplementary Leverage Ratio (SLR), which requires banks to maintain a minimum capital buffer, could ease financial conditions additionally. Analysts propose that the rotation may pave the way to more capital inflow in risk assets such as cryptocurrencies.

Xu highlighted digital assets’ high correlation with the global money supply. He noted that over the past 10 years, the beta of major cryptocurrencies to global liquidity changes has exceeded 8.5, well-above that of equities or commodities. This suggests that crypto markets are more likely to react more theatrically to changes in the monetary growth.

The Bitcoin Supply Shock Factor Seizes Crypto Limelight

The fixed supply of Bitcoin is another important reason why the asset could become strong in the long term. Bitcoin will never exceed 21 million coins in total, and its issuance is halved every four years, making BTC similar to gold but with more rigid supply rules.

In addition, Xu stated that the monetary framework of Bitcoin, alongside the sustained institutional interest, might aid in bringing the valuation of the commodity to be on the same level as gold in the long run. He cited the rising inflows into U.S. spot Bitcoin ETFs, which have topped $45.29 billion since their inception in January 2024, according to Farside UK.

In addition, he spotlighted the rising corporate treasury exposure, now at over $85 billion as evidence of maturation. “Assuming Bitcoin achieves the same market cap as tradable gold, a price path to $1 million per Bitcoin by 2035 is not just possible — it is mathematically defensible,” Xu wrote.