Bitcoin’s decline this October marks a liquidity-driven mid-cycle reset, according to analysts Nathan Frankovitz and Matthew Sigel from VanEck, who stated in a recent market report that:

“Leverage has normalized, on-chain activity is rising, and digital assets’ macro role continues to strengthen.”

Currently, Bitcoin is down 14% from its peak, struggling to rebound after an unprecedented leveraged sell-off. Frankovitz and Sigel emphasize that this is merely a mid-cycle correction rather than a shift towards a bear market.

No Bear Market Yet

The analysts highlight that global M2 growth accounts for over half of Bitcoin’s price fluctuations, reiterating its characteristic as an anti-inflationary asset. Recent data suggests the global M2 money supply has increased by 6.8% since the year’s start, as central banks persist in printing money. They identified three crucial factors that sway Bitcoin’s valuation and market dynamics: global liquidity, leverage, and on-chain activity. Since October 2020, changes in futures open interest have clarified nearly 73% of Bitcoin’s price variance, demonstrating significant correlations between blockchain revenues and token prices, indicative of real-world adoption.

Moreover, VanEck expressed confidence in Bitcoin’s potential, especially against a backdrop of escalating fiat debasement. The company noted:

“With Bitcoin accounting for approximately 2% of global money supply, we assert that digital assets may gain a larger footprint in investment portfolios; owning less than 2% Bitcoin essentially positions one against this asset class.”

Caution: Volatility Ahead

This optimistic outlook has been supported by various analysts, who argue that the bull market remains intact. However, investor Ted Pillows cautioned of significant volatility ahead. He remarked:

“We continue to face uncertainty until the next significant macroeconomic event occurs: the Consumer Price Index (CPI).”

US Treasury Secretary Scott Bessent has projected a drop in inflation next month, suggesting that this week’s CPI report could yield unexpected results:

“High inflation typically pressures cryptocurrency, as it raises expectations for stricter monetary policies. If the CPI shows less inflation than anticipated, crypto markets might respond positively.”

Michaël van de Poppe echoed this sentiment, stating that upcoming CPI data will guide market movements for Bitcoin and influence outcomes from the Federal Reserve.

The CPI report for September is scheduled to be released this Friday, with market analysts keenly watching for its implications.