Why the road ahead for BTC isn’t as bleak as it looks
Summary
Bitcoin currently trades at $87,000, down 32% from its October 6 all-time high of $126,210. The correction has played out over nearly two months, with the most significant liquidation event occurring in mid-October.
Where we are now is less about parsing the drawdown itself (corrections of this magnitude are routine in Bitcoin bull markets) and more about assessing whether the structural conditions that supported the prior rally remain intact.
To put it bluntly, they definitely do.
QT has ended, rate cuts continue, institutional infrastructure is expanding, and on-chain data shows supply steadily migrating to long-term holders.
In this piece, we will examine the macro backdrop and market structure to contextualize the current setup.
Metric | Value |
Current Price | Current Price |
All-Time High | $126,210.50 (Oct 6, 2025) |
Drawdown from ATH | -32% |
Fed Funds Rate | 3.75% - 4.00% |
Dec Rate Cut Probability | 80-87% |
Total ETF AUM | >$100 billion |
The macro backdrop: Why this isn't 2022
QT ends, liquidity returns
Quantitative tightening officially ended on December 1, 2025, removing a structural drain of approximately $60 billion monthly from risk asset markets.
Since June 2022, the Fed has drained $2.3 trillion from its balance sheet, which now stands at approximately $6.6 trillion. The termination of QT removes a persistent headwind that weighed on liquidity conditions throughout 2024-2025.
The rate cut path
The Federal Reserve has been on a rate-cutting path since September 2025. The October 29 FOMC meeting delivered a 25 basis point cut, bringing the target range to 3.75%-4.00%.
Policy Metric | Current Status |
Fed Funds Rate | 3.75% - 4.00% |
Last Cut (Oct 29) | -25 bps (Vote: 10-2) |
Dec 9-10 Cut Probability | 80-87% |
QT Status | Terminated Dec 1, 2025 |
Balance Sheet Reduction | $2.3 trillion (since Jun 2022) |
Current Balance Sheet | ~$6.6 trillion |
Terminal Rate Target | 3.00% - 3.25% (mid-2026) |
US Inflation (Sep 2025) | 3.0% |
With US inflation at 3.0% and the Fed funds rate at 3.75%-4.00%, real rates remain modestly positive but are expected to turn negative as the cutting cycle continues.
Market consensus points to 2-3 additional cuts through mid-2026. This trajectory echoes the 2019 "insurance cuts" that preceded Bitcoin's 2020-2021 bull run.
The fiscal reality
Fiscal Metric | Value |
US National Debt | $38 trillion |
Annual Interest Costs | $1.2 trillion |
Deficit/GDP Ratio | >6% |
Recent Debt Growth | +$1T in ~2 months |
The US national debt surpassed $38 trillion in October 2025, adding $1 trillion in just over two months. Annual interest costs on federal debt have reached $1.2 trillion, now exceeding defense spending.
This fiscal trajectory creates structural demand for non-sovereign stores of value. When governments run persistent deficits financed by central bank accommodation, assets with fixed supply tend to benefit.
Dollar weakness, Gold strength
Asset | Current Level | YoY Change |
DXY (Dollar Index) | 99.17 | -6.83% |
Gold (XAU/USD) | $4,220/oz | +59.73% |
Gold ATH | $4,379.22 | Oct 17, 2025 |
Bitcoin | $87,000 | -8.9% YTD |
Both Bitcoin and gold are responding to the same macro forces: fiscal expansion and dollar debasement expectations.
Gold's 60% annual gain demonstrates that store-of-value assets are being bid aggressively; Bitcoin's relative underperformance reflects crypto-specific headwinds (ETF outflows, leverage unwinding) rather than a repudiation of the macro thesis. The correlation supports Bitcoin's thesis as a monetary asset.
Author
Derek Lim
Caladan
Derek has held senior leadership positions including Head of Ecosystem at Mantle Network, Head of Research at The Spartan Group’s $100 million Web3 venture-building arm, as well as Head of Research at Bybit, where he special
