Bitcoin’s run was cut short on Tuesday as a spike in selling pressure undid most of the new year's gains. Experts suggest the pullback is a short-term impediment to long-term recovery.
The easing of the year-end liquidity crunch and growing expectations for Federal Reserve rate cuts in 2026 have been the two key factors driving the rally.
“The convergence of these two factors triggered a recovery in risk assets; Bitcoin benefited accordingly, and ETF flows shifted back to net inflows,” Tim Sun, senior researcher at HashKey Group, told Decrypt.
“The market has not yet entered an 'offensive state' driven by the resonance of sentiment and high leverage,” he said. “This lack of further upward momentum is what caused Bitcoin to stall after touching $94,000.”
The whipsaw that followed, involving a sudden 3% drop from this local top to $91,544 and a subsequent recovery to $92,618, where Bitcoin is currently trading, has triggered $440 million in liquidations, with eager bulls bearing the brunt.
The index provider noted that feedback from its consultation “confirmed institutional investor concern that some digital asset treasury companies exhibit characteristics similar to investment funds.”
MSCI is now initiating a broader consultation on how to treat non-operating companies.
“MSCI’s decision effectively removed a significant source of potential selling pressure,” Sun noted, explaining that an exclusion would have forced passive funds to sell and created a negative narrative for institutional allocation.
“In the first half of the year… the short-term trend is likely to be volatile yet strengthening, driven by specific events rather than a unilateral upward move,” the HashKey analyst noted.
Looking further ahead, he expects institutional allocations via spot ETFs to remain the primary driver, absorbing long-term capital and reducing price reliance on short-term sentiment.
“The broader market will continue to filter out speculative projects… assets related to infrastructure, payment settlements, and real-world applications are the most likely to benefit,” Sun said.
