Written by: Blockchain Knight
A joint survey by Coinbase and Glassnode reveals that a quarter of institutions believe the crypto market has entered a bear market, yet most still consider Bitcoin undervalued and have continued holding or increasing their positions since last October.
This paradox reflects the core positioning of institutions: cautious about the short-term outlook while maintaining core Bitcoin holdings, avoiding small-cap, high-volatility assets as they are prone to rapid devaluation amid deleveraging.
The root of the paradox lies in the dimensional difference between cycle labeling and value judgment. Institutions use "bear market" to describe short-term cycle phases (tightening liquidity, weak sentiment, defensive positioning), while "undervalued" is an assessment based on long-term value, encompassing core factors such as Bitcoin adoption, scarcity, market structure improvements, and regulatory clarity.
The October deleveraging only impacted altcoins, with Bitcoin's market share slightly rising from 58% to 59%, indicating that selling pressure was concentrated in long-tail assets, and Bitcoin became the core allocation for risk reduction without exiting.
Institutional strategies have simultaneously shifted toward defense and value preservation. The perpetual futures system leverage ratio has dropped to 3% of the total crypto market cap (excluding stablecoins), options open interest has surpassed that of perpetual futures, and put/call option skews across all maturities are positive.
After the October liquidation, institutions have relied more on tools like options and basis trading to control risks and capture arbitrage gains, avoiding liquidation impacts.
On-chain data also shows that market sentiment has shifted from confidence to anxiety but has not collapsed. "Bear market" is a short-term judgment, while "undervalued" is a long-term perception. The bridge between them lies in institutions viewing macro liquidity as the core driver, rather than solely relying on the crypto four-year cycle.
Although institutions use the four-year cycle as a behavioral reference, they believe the impact of halving is limited after controlling for macro variables like liquidity and interest rates. A customized global M2 index shows a 0.9 correlation with Bitcoin's price movements, leading by 110 days, becoming a key basis for institutions to judge Bitcoin's long-term value.
Institutions expect the Fed to cut rates twice this year by a total of 50 basis points, which would benefit risk assets, further supporting their undervaluation judgment.
Overturning this argument would require multiple signals to resonate simultaneously: a sharp deterioration in macro liquidity, a reversal in on-chain accumulation indicators, long-term holders selling in weak market conditions, and persistently low institutional demand.
Current institutional divergence lies in the cycle phase, but consensus centers on Bitcoin's relative attractiveness. It is not merely cheap in price but is the only crypto asset institutions recognize as durable in an unfriendly regulatory environment.
Whether the institutions' final judgment holds true depends on whether the macro framework can withstand subsequent economic tests, rather than the outcome of debates over short-term cycle labels.
