VanEck: Bitcoin Bull Market Intact as October Crash Deemed Mid-Cycle Correction
Introduction: A Reset, Not a Reversal
The cryptocurrency market experienced significant turbulence in October, with Bitcoin posting double-digit losses and sparking fears of an impending bear market. However, a new analysis from global investment manager VanEck provides a reassuring perspective for investors. In a recent market report, the firm’s analysts have characterized the sharp downturn not as the end of the bull run, but as a healthy and expected "mid-cycle correction." This assessment, grounded in on-chain data and macroeconomic factors, suggests that the foundational drivers of Bitcoin's long-term growth remain firmly intact. By examining leverage levels, global money supply, and on-chain activity, VanEck builds a compelling case that the current pullback is a liquidity-driven reset within a continuing bull cycle.
Understanding the Mid-Cycle Correction
According to VanEck analysts Nathan Frankovitz and Matthew Sigel, the October pullback reflects a “liquidity-driven mid-cycle reset.” This terminology is crucial for understanding their bullish outlook. A mid-cycle correction is a significant price decline that occurs within a larger, overarching bull market. It is distinct from a bear market, which typically signifies a prolonged downturn of 20% or more from recent highs and a fundamental shift in market sentiment.
The report points to specific data to support this classification. Bitcoin is currently trading down 14% from its all-time high, a decline consistent with historical mid-cycle pauses rather than cycle tops. Furthermore, the analysts noted that the market has undergone a "record leverage flush," where over-leveraged positions were forcibly liquidated. This painful but necessary process has normalized market conditions. With leverage now at the 61st percentile and Bitcoin prices near one-year lows relative to gold, the conditions align with a corrective phase, not the start of a sustained bear trend.
Key Pillars Supporting the Bull Thesis
VanEck’s confidence in the ongoing bull market is not based on sentiment alone. The report identifies three concrete pillars that influence Bitcoin’s price and reinforce its long-term value proposition: global liquidity, leverage, and on-chain activity.
Global Liquidity and M2 Supply: The report highlights that global M2 money supply growth explains over half of Bitcoin’s price variance. Data from MacroMicro shows that the global M2 supply has grown by 6.8% since the beginning of 2021 as central banks continue expansive monetary policies. This reinforces Bitcoin's core narrative as an "anti-money printing" asset. As fiat currencies are debased through increased supply, Bitcoin’s fixed scarcity becomes increasingly attractive. VanEck stated it "wasn’t willing to bet against Bitcoin with fiat debasement accelerating in recent years," underscoring this fundamental driver.
The Role of Leverage: The normalization of leverage is cited as a key sign of a healthy reset. The violent sell-off earlier in October effectively purged excessive risk from the system. The analysts noted that nearly 73% of Bitcoin’s price variance since October 2020 has been explained by changes in futures open interest, a direct measure of leverage in the market. The flush has brought this metric back to more sustainable levels, reducing the immediate risk of another cascading liquidation event.
On-Chain Activity as an Adoption Metric: Beyond price and leverage, the health of the Bitcoin network itself provides bullish signals. The report points to "strong correlations between blockchain revenues and token prices, which demonstrate real adoption." Rising on-chain activity, such as transaction volume and network fees, indicates genuine use and utility, providing a fundamental underpinning for price that is separate from speculative trading.
Bitcoin's Growing Role in Global Portfolios
VanEck makes a striking statement regarding Bitcoin’s strategic allocation in modern investment portfolios. The analysts argue that given Bitcoin currently comprises approximately 2% of the global money supply, owning less than ~2% in digital assets is "implicitly expressing a short position on the asset class."
This perspective frames digital assets not as a speculative gamble but as a necessary hedge against systemic fiat devaluation. It suggests that for a portfolio to be neutrally positioned relative to the evolving global monetary landscape, an allocation to Bitcoin and similar assets is becoming essential. This institutional viewpoint marks a significant evolution in how digital assets are perceived by traditional finance, moving them from the fringe toward the mainstream.
A Word of Caution: Navigating Near-Term Volatility
While VanEck’s medium to long-term outlook is decidedly bullish, the report and other commentators acknowledge that the path forward will not be smooth. Investor Ted Pillows cautioned that "there is still a lot of volatility ahead," a sentiment echoed by others in the space.
The immediate focus for many traders is on macroeconomic data, particularly inflation figures. MN Trading founder Michaël van de Poppe stated that "markets continue to fumble until the next big macroeconomic event comes in: CPI," referring to the Consumer Price Index report. He added that this data "is going to provide a direction for the markets of Bitcoin, and also what we could expect from the Fed."
The relationship is straightforward: high inflation pressures central banks to tighten monetary policy by raising interest rates or tapering asset purchases. Such actions typically strengthen the U.S. dollar and create headwinds for risk-on assets like cryptocurrencies. US Treasury Secretary Scott Bessent expects lower inflation next month but warned that "this week’s CPI report could disappoint." He added, "If CPI comes in lower than expected, crypto could bounce." The delayed CPI report for September was scheduled for release on Friday, placing it as a critical short-term catalyst for market direction.
Conclusion: Staying the Course Amid Market Noise
VanEck's analysis provides a data-rich framework for interpreting recent market volatility. By defining the October crash as a mid-cycle correction driven by leverage normalization, they offer a compelling argument that the core Bitcoin bull market remains intact. The pillars of their thesis—global M2 expansion, normalized leverage, and strengthening on-chain fundamentals—paint a picture of an asset class maturing amidst macroeconomic tailwinds.
For investors, the key takeaway is the importance of distinguishing between short-term price swings and long-term value drivers. While near-term volatility driven by CPI reports and Fed policy is inevitable, the underlying trends of fiat debasement and Bitcoin’s adoption appear robust. The current correction may therefore represent a strategic entry or accumulation point for those who subscribe to the long-term narrative.
Moving forward, market participants should watch two key areas: continued on-chain metrics for signs of network health and broader macroeconomic indicators for clues on global liquidity conditions. As VanEck concludes, with Bitcoin's role in the global financial system still expanding, periods of price consolidation are not signals of failure but rather natural—and necessary—phases within a larger growth cycle.
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