Bitcoin Between Bear Market and Trend Reversal: Why Macro Data and Institutional Inflows Are Sparking New Hope

Bitcoin Between Bear Market and Trend Reversal: Why Macro Data and Institutional Inflows Are Sparking New Hope

The Bitcoin market finds itself at a critical turning point. After plummeting to a 10-month low of $75,442 on Monday ^[2], the leading cryptocurrency is slowly recovering and currently trades at around $78,000. While on-chain analysts warn of further price declines, surprisingly strong U.S. economic data and massive institutional inflows suggest a possible stabilization. The critical question: Has the bottom already been reached, or is Bitcoin facing another test of deeper support zones?

For Bitcoin investors, the current situation is particularly complex. On one hand, traditional risk indicators show positive signals; on the other, there is a lack of broad accumulation by major market participants. The coming weeks will likely determine whether current price levels represent a buying opportunity or a waystation on the path downward.

The Facts

Following last weekend's sharp price drop, Bitcoin shows a slight recovery, trading with gains of around 5 percent back above the $75,000 mark ^[1]. Despite this short-term countermovement, the broader crypto market continues to record double-digit losses on a weekly basis. Bitcoin has now fallen almost 38 percent from its October peak ^[2].

The skepticism of many analysts is based on clear on-chain signals. Alex Thorn, Head of Research at Galaxy Digital, identifies a significant supply gap in the data between $82,000 and $70,000 ^[1]. This increases the risk that Bitcoin must test deeper liquidity zones before sustainable bottom formation occurs. Thorn cites the range between $56,000 and $59,000 as a potential target zone, corresponding to the so-called Realized Price ^[1]. Jamie Coutts of Real Vision supplements this assessment with the observation that current net demand comes almost exclusively from a shrinking group of treasury buyers ^[1]. For a genuine bottom, these players would need to fundamentally reverse their positioning.

Data from Alphractal confirms this skeptical stance: Wallets holding between 10 and 1,000 Bitcoin remain in selling mode ^[1]. While the cohort of addresses with 1,000 to 10,000 BTC shows growth, a large portion of these holdings is directly connected to crypto exchanges, which does not necessarily indicate private accumulation ^[1]. Long-term holders show hardly any signs of significant buying ^[1].

However, two different data points offer a glimmer of hope. First, spot Bitcoin ETFs recorded net inflows of $561.9 million on Monday, ending a four-day period of outflows ^[1]. Since not a single fund recorded outflows, this suggests that institutional investors are using the lower prices below the aggregate average purchase price of $84,000 for strategic positioning ^[1].

Second, macroeconomic data from the U.S. delivers surprisingly positive signals. The ISM Manufacturing Purchasing Managers' Index (PMI) recorded a value of 52.6 in January—the highest level since August 2022 ^[2]. The index significantly exceeded market expectations of 48.5 and ended 26 consecutive months of economic contraction ^[2]. A value above 50 signals economic expansion, while values below indicate contraction.

Bitcoin analysts see this strong ISM value as a potential signal for a trend reversal. Joe Burnett, Vice President of Bitcoin Strategy at Strive, explains: "Historically, these PMI reversals mark the transition to risk-on conditions" ^[2]. He points out that Bitcoin rose significantly following increases in the Manufacturing Index in 2013, 2016, and 2020. Pseudonymous analyst Plan C warns: "If you don't quickly evolve your understanding of the Bitcoin cycle from the 4-year halving illusion to a business-cycle and macro mindset, you will completely miss the second massive phase of this Bitcoin bull market" ^[2].

Analysis & Context

The current situation reveals a fundamental conflict between micro and macroeconomic indicators. While Bitcoin-specific on-chain data paint a clear picture of lacking accumulation, broader economic data suggest an improved environment for risk assets. This discrepancy is not atypical for turning points in the Bitcoin cycle.

Historically speaking, the correlation between the ISM Manufacturing PMI and Bitcoin price movements shows an interesting pattern. In 2013, 2016, and 2020, a reversal of the PMI index was indeed followed by a significant Bitcoin rally. However, caution is warranted: Benjamin Cowen of Into The Cryptoverse rightly points out that Bitcoin doesn't always move in lockstep with the Manufacturing Index ^[2]. Last year, Bitcoin rose to its all-time high of over $126,000 while the PMI partially fell or stagnated.

The massive ETF inflow round of $561.9 million is a particularly significant data point. It shows that institutional investors view the price decline below the average ETF purchase price of $84,000 as a buying opportunity. This contrasts with the behavior of whale wallets and suggests a divergence between traditional financial actors and crypto-native investors. Historically, such phases were often harbingers of medium-term bottom formation, provided the ETF inflows prove sustainable.

However, the supply gap identified by Alex Thorn between $82,000 and $70,000 is a warning signal to be taken seriously. Such liquidity gaps emerge when little Bitcoin changes hands in a certain price range. If the price falls back into this zone, support levels are missing, which can lead to accelerated downward movements. The target range cited by Thorn between $56,000 and $59,000 corresponds to the Realized Price—the price at which all Bitcoin were last moved on average. This has often served as strong support in previous cycles, particularly in 2019 and 2022.

Conclusion

• The current Bitcoin recovery stands on shaky ground: While institutional ETF investors accumulate, whale wallets remain in selling mode, indicating a fragile market condition

• The surprisingly strong ISM Manufacturing PMI rise to 52.6 could mark a macroeconomic turning point—historically, such PMI reversals were often followed by significant Bitcoin rallies, though the correlation is not perfect

• Downside risk remains substantial: The identified supply gap between $82,000 and $70,000 increases the probability of further tests of deeper support zones in the range of $56,000 to $59,000

• Investors should closely monitor ETF flows in the coming days—only sustained inflows despite volatile markets would indicate sustainable bottom formation

• The divergence between traditional economic indicators and crypto-specific on-chain data underscores Bitcoin's increasing integration into the macroeconomic context—the classic 4-year halving narrative is losing explanatory power