By the end of 2025, core CPI has cooled to 2.6%, easing market concerns over long-term high inflation and reducing the urgency for continued large rate hikes. In such an environment, capital is more likely to be reallocated into alternative assets, and Bitcoin is increasingly viewed as "digital gold," becoming a digital asset option benchmarked against gold.

The Federal Reserve's quantitative easing (QE) program is especially likely to further amplify liquidity in financial markets, providing a favorable external environment for Bitcoin price appreciation. Historically, Bitcoin's average return in the first quarter is about 50%, often accompanied by a corrective rebound in volatility during the fourth quarter. As central banks around the world shift their policy focus from "controlling inflation" to "prioritizing growth," the macro narrative surrounding Bitcoin is also transitioning from a defensive logic to a more constructive bullish framework.

Institutional Return: Continual Accumulation Amid Volatility

Despite significant capital outflows by the end of 2025, such as a net outflow of $6.3 billion from Bitcoin ETFs in November, institutional interest in Bitcoin remains strong. Companies like MicroStrategy continue to increase their holdings: adding 11,000 Bitcoin (approximately $1.1 billion) in early 2025.

Meanwhile, medium-sized holders further increased their share of the total Bitcoin supply in the first quarter of 2025. This strategic buying amid volatility reflects a long-term commitment by institutions and mid-sized funds to position Bitcoin as a "store of value."

The divergence between ETF capital outflows and ongoing institutional accumulation highlights a more subtle structural change in the market: when prices decline, ETF funds driven by retail sentiment tend to withdraw, while core institutional investors seem to be positioning for a rebound in advance.

This trend also aligns with Bitcoin's historical patterns: although Bitcoin generally exhibits an upward long-term trajectory, short-term holders often continue to "sell at a loss" amid volatility. This is evidenced by the Short-Term Holder Spent Output Profit Ratio (SOPR), which in early 2025 remained below 1 for over 70 consecutive days, indicating that short-term holders were generally selling at a loss.

Such behavior typically signals that the market is entering a "long-term accumulation" phase: when short-term traders are forced to cut losses and exit, it creates more strategic buying opportunities for long-term investors and provides conditions for institutions to find entry points at lower levels.

On-Chain Indicators: In the "Value Zone" but Cautious of Downside Risks

BTC Absolute Momentum Strategy (Long Only)

Enter long when the 252-day Rate of Change (RoC) is positive and the price closes above the 200-day Simple Moving Average (200-day SMA). Exit when the price closes below the 200-day SMA; or upon any of the following triggers: after holding the position for 20 trading days; take profit (TP) +8% / stop loss (SL) -4%.

By the end of 2025, Bitcoin's price shows a clear retracement: a total decline of about 6% for the year, with a drop exceeding 20% in the fourth quarter. Meanwhile, on-chain signals are diverging. On one hand, indicators like "Percent Addresses in Profit" continue to weaken, and long-term holders are increasing their selling activity; on the other hand, metrics such as "Dynamic Range NVT" and "Bitcoin Yardstick" suggest Bitcoin may be in a historic "value zone," similar to valuation states seen during multiple significant bottoms in the past.

This contradiction indicates that the market is at a critical bifurcation point: the short-term bearish trend persists, but the underlying fundamentals suggest the asset may be undervalued. For institutional investors, this structural divergence offers an asymmetric opportunity—limited downside risk with considerable potential for a rebound. Especially with the Federal Reserve's policy shift and Bitcoin's historical performance in Q1 2026 possibly catalyzing this, the opportunity is further amplified; meanwhile, the narrative of Bitcoin as an "inflation hedge" is also regaining market recognition.

Conclusion: A Rebound in 2026 Is Brewing

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 the initiation of QE, along with gradually cooling inflation, could channel more liquidity into alternative assets including Bitcoin. Even amid significant volatility in Q4 2025, continued institutional buying reflects confidence in Bitcoin's long-term value.

For investors, the key takeaway is clear: Bitcoin's upcoming "strategic rebound" is not just a price correction but a result of changing monetary policy environments and shifts in institutional behavior. As the market seeks a new equilibrium during this transition, those who recognize macro trends and institutional shifts early may position themselves more advantageously for the next phase of Bitcoin's market cycle.