Bitcoin fails to return to $100,000; can bullish momentum support a new breakout?

Bitcoin has yet to retake the $100,000 mark, but three major positives support a rebound: the Federal Reserve will start cutting interest rates and implementing QE in 2026 to release liquidity; ETF fund withdrawals are ongoing, but institutions like MicroStrategy are countertrend accumulating 11,000 coins; on-chain valuation indicates the asset is in a historic “value zone,” offering a cost-effective entry window.

Federal Reserve Policy Shift to Liquidity Release Boosts Bitcoin

The Federal Reserve’s decision to initiate rate cuts and quantitative easing (QE) in Q1 2026 marks a critical policy shift. These measures aim to stimulate economic growth and address persistent but easing inflation pressures. Historically, such policies tend to favor risk assets, including Bitcoin.

By the end of 2025, core CPI has cooled to 2.6%, easing market fears of prolonged high inflation and reducing the urgency for continued aggressive rate hikes. In this environment, capital is more likely to reallocate into alternative assets, with Bitcoin increasingly viewed as “digital gold,” serving as a digitalized alternative to traditional gold.

The Fed’s QE program could further amplify liquidity in financial markets, creating a favorable external environment for Bitcoin’s price rise. Historically, Bitcoin’s average return in Q1 is about 50%, often accompanied by a corrective rebound from Q4 volatility. As central banks shift focus from “controlling inflation” to “prioritizing growth,” the macro narrative around Bitcoin is transitioning from defensive to more bullish.

This policy timing is also noteworthy. Q1 2026 coincides with a key period of global economic recovery from high interest rates, where liquidity release can impact not only traditional markets but also high-beta assets like cryptocurrencies. When dollar liquidity re-enters the market, Bitcoin is often among the first beneficiaries.

Institutions Accumulate Against the Odds Amid Volatility; ETF Withdrawals Signal Buying Opportunities

Despite significant capital outflows at the end of 2025, such as a net outflow of $6.3 billion from Bitcoin ETFs in November, institutional interest remains strong. Companies like MicroStrategy continue to increase holdings, adding 11,000 BTC (about $1.1 billion) in early 2025. Meanwhile, mid-sized holders further increased their share of the total Bitcoin supply in Q1 2025.

The divergence between ETF capital outflows and ongoing institutional accumulation highlights a more subtle structural change: when prices decline, retail-driven ETF funds tend to withdraw, while core institutional investors are positioning for a rebound. This strategic buying amid volatility reflects a long-term commitment to Bitcoin as a “store of value.”

Three Features of Diverging Retail and Institutional Behavior

ETF Capital Outflows: $6.3 billion net outflow in November, driven by retail panic

Core Institutional Accumulation: MicroStrategy and others continue buying, viewing volatility as an opportunity

Mid-sized Holdings Rising: Long-term capital share in supply increases, optimizing the holder structure

This trend aligns with Bitcoin’s historical pattern: despite a long-term upward trajectory, short-term holders often sell in volatility at a loss. This is evidenced by the Short-Term Holder Spent Output Profit Ratio (SOPR), which in early 2025 remained below 1 for over 70 days, indicating short-term sellers were generally at a loss.

Such behavior often signals a market entering a “long-term accumulation phase”: forced stop-loss sales by short-term traders create strategic buying opportunities for long-term investors and provide entry points for institutions to deploy capital at lows. Historically, the transition of chips from weak hands to strong hands often precedes a bull market reversal.

On-Chain Valuation Shows Value Zone, but Beware of Short-term Downside

By the end of 2025, Bitcoin’s price showed a clear retracement: a total decline of about 6% for the year, with a drop of over 20% in Q4. Meanwhile, on-chain signals diverged. Indicators like “Percent Addresses in Profit” continued weakening, with increased selling by long-term holders; but other metrics such as “Dynamic Range NVT” and “Bitcoin Yardstick” suggest Bitcoin may be in a historic “value zone.”

This contradiction indicates the market is at a critical crossroads: the short-term downtrend persists, but underlying fundamentals imply the asset may be undervalued. For institutional investors, this structural divergence offers an asymmetric opportunity—limited downside risk with considerable potential for rebound. Especially with the policy shift by the Fed and Bitcoin’s historical performance in Q1 2026, this opportunity is further amplified.

Dynamic Range NVT measures Bitcoin network value relative to transaction volume; when this indicator is low, it generally signals undervaluation. Bitcoin Yardstick combines multiple metrics to assess valuation levels, currently indicating Bitcoin is in valuation zones similar to early 2020 and late 2022, both of which preceded significant rallies.

Meanwhile, the narrative of Bitcoin as an “inflation hedge” is regaining market acceptance. As core CPI declines from peaks but remains elevated, investors are reassessing Bitcoin’s role as an inflation hedge. This renewed narrative, coupled with macro liquidity improvements, could provide dual support for Bitcoin’s price.

Three Engines Powering a 2026 Rebound

The confluence of macro tailwinds and institutional capital returning is building a more compelling bullish case for Bitcoin in 2026. The Fed’s rate cuts and QE, along with easing inflation, may channel more liquidity into alternative assets including Bitcoin; even amid significant volatility in Q4 2025, institutional buying continues, reflecting confidence in Bitcoin’s long-term value.

For investors, the key takeaway is that the upcoming “strategic rebound” in Bitcoin is not just a price correction but a result of macro policy shifts and changing institutional behavior. As markets seek a new equilibrium during this transition, those who recognize macro and institutional trends early may gain an advantage in the next phase of Bitcoin’s rally.

From a risk management perspective, Bitcoin’s risk-reward profile is improving. Downside is supported by on-chain valuation metrics, while upside is fueled by macro liquidity and ongoing institutional buying. This asymmetric risk structure offers a relatively ideal entry point for medium- to long-term investors. Historical data shows that an average 50% return in Q1 is not accidental but results from the combined effects of Fed policy cycles and Bitcoin’s market structure.