In a global investor survey conducted by Coinbase Institutional and Glassnode, 1 in 4 institutions agree that cryptocurrencies are currently in a bear market. However, the majority of institutions still said Bitcoin is undervalued, and most said they had maintained or increased their exposure since October.
This discrepancy is important because it captures the current position of financial institutions: institutional wariness, a desire to maintain allocations, and a preference to concentrate risk in Bitcoin rather than smaller, more volatile tokens that can be quickly unraveled when levered.
bear market label, price tag bid
The market structure in this report explains why this paradox exists.
Although October’s deleveraging caused significant damage to altcoin price trends, Bitcoin’s dominance remained largely unchanged, slowly declining from 58% to 59% in Q4 2025.
This stability is important because it shows that the selling is not evenly distributed. This was more of a long-tail washout than a widespread rejection of cryptocurrencies, with Bitcoin acting more like an asset to hold when you’re reducing risk but not breaking out of the category.
David Duong, Coinbase Institutional’s global head of research, offered a neat way to reconcile the term “bear market” with the “undervalued” belief in an interview. crypto slate.
His point was that while institutions often use cycle labels to describe their systems and positions, ‘value’ is a long-term assessment tied to adoption, scarcity, structure and policy context.
“When financial institutions assess the value of Bitcoin, they look beyond short-term price fluctuations to factors such as adoption, scarcity, improved market structure, and a clearer regulatory framework.
Historically, bear markets often signal periods of tight liquidity and weakening sentiment, ultimately laying the foundation for new institutional investor participation and future growth.
In other words, when investors call this a bear market (which, by the way, is not our view), they are describing the stage of the cycle and general risk appetite.
Positioning may be defensive, liquidity may be selective, and price action may be trending down or chopped with negative skew.
They’re talking about the regime we’re currently trading in, not where they think Bitcoin should end up. ”
The report’s own data are consistent with that interpretation. This shows that the market has stopped rewarding indiscriminate risk-taking, but is not losing bids for the biggest assets.
Coinbase and Glassnode said perpetual futures were hit the hardest, with the systematic leverage ratio dropping to 3% of total crypto market capitalization (excluding stablecoins).
At the same time, options open interest soared as traders scrambled to protect against further price declines.
As a company, if we instinctively tell it’s a bear market, we still maintain the exposure we want through insurance, mitigating liquidation risk, and ways to avoid being forced out at the worst possible time.
From monitoring to protection
An easy mistake to make here is to treat “undervaluation” as a single valuation model shared by everyone.
In reality, both the report and Duong describe a set of assumptions that resemble a market structure more than a properly discounted cash flow argument.
Let’s start with the changes to derivatives.
According to the report, the OI of BTC options exceeds the OI of perpetual futures, and the 25-delta put-call skew is in positive territory across 30-day, 90-day, and 180-day maturities, but that doesn’t happen in a market looking to maximize upside through leverage.
It happens in a market that is willing to stay for the long term, but is determined to define the risks.
When asked what financial institutions did after the October clearing reset, Duong explained the transition to the same option:
“Institutional interest in on-chain expansion remained after the October reset, but in a measured and multi-venue manner.
Additionally, institutional investors are increasingly expressing their views through options and basis trades that provide convexity or carry without the same liquidation risk that drove October’s moves. ”
This last line is key, showing that institutions have changed the way they perceive the revelations.
Options trading and basis trading aren’t strategies that grab the headlines, but they’re a way for technical books to stay in the game as the regime punishes excesses.
On-chain data tells the same story.
According to Coinbase and Glassnode, sentiment as measured by real-adjusted NUPL deteriorated from belief to anxiety in October and remained that way throughout the quarter. It’s certainly not euphoria, but it’s not surrender either.
The decline in real-adjusted NUPL indicates that the market has stopped paying for optimism but is still hanging on. This interpretation fits in a world where investors see assets as cheap relative to what they believe to be at equilibrium, but may be cautious about the current situation.
The report also notes that in the fourth quarter of 2025, BTC that moved within three months rose by 37%, while BTC that did not move for more than a year fell by 2%, which the authors interpret as a distribution stage in late 2025.
Distribution doesn’t have to be a death sentence if you want to take the institutional perspective seriously. This could mean large holders derisking and gaining strength, with the market now trying to find the next holder to own the supply without the need for continuous liquidity infusions.
Here, the argument that Bitcoin is “undervalued” begins to become less about a single fair value number and more about the belief that Bitcoin has become the only crypto asset that can absorb capital at scale without the need for retail bidding to maintain its structure.
Mr. Duong clearly separated the Bitcoin underwriting framework from other cryptocurrency markets.
“Unlike retail participants, who often focus on short-term price movements and market cycles, financial institutions value Bitcoin’s long-term value proposition over timing.
In this context, Bitcoin is increasingly being treated as a strategic, store of value asset and macro hedge, rather than a speculative token in the broader cryptocurrency world. ”
This is consistent with what the report says about large and small stocks.
Their topline outlook for Q1 2026 favors large-cap tokens, with small-caps still dealing with the aftermath of October.
Given this, thinking Bitcoin is “undervalued” may not be so much that Bitcoin is cheap on its own, but that it is the only crypto asset that institutions can treat as a permanent allocation when regimes are unfriendly.
Liquidity is the real cycle
The second pillar of the paradox is the time axis.
Calling something a bear market is usually a decision over a shorter time frame, while calling something undervalued is often a decision over a longer time horizon. The bridge between the two is whether institutions still believe that markets are ruled by a four-year clock, or whether they have moved to a macro framework where liquidity, interest rates and policy play most of the roles.
In Duong’s view, the four-year cycle still exists as a reference point for behavior, but educational institutions are not treating it as a strict model.
He argued that controlling for the macro variables that drive all risk assets would weaken the power of the halving for financial institutions.
“In conversations with these organizations, the four-year cycle is still a reference point, but primarily treated as a behavioral template rather than a hard model.
They consider where we are compared to previous cycle lows/highs, halving dates, and typical drawdown/recovery patterns. Because these levels are important for positioning and sentiment.
That said, the evidence that half-life causally drives each cycle is weak. There are only four observations, which are largely confounded by major macro policies and policy changes (e.g. quantitative easing, coronavirus stimulus).
Our 2026 outlook makes a clear case that, controlling for liquidity, interest rates and dollar movements, the economic relevance of the halving is somewhat questionable. ”
The report notes that the consumer price index remained at 2.7% in December and cites the Atlanta Fed’s GDPNow forecasting real GDP growth of 5.3% in the fourth quarter of 2025. The report outlines a base case in which the Fed cuts rates twice (totaling 50 basis points), which are priced into federal funds futures, which the authors see as a tailwind for risk assets.
They also warn that the job market is cooling, with 584,000 jobs added in 2025, compared to 2 million in 2024, and cite the introduction of AI as one of the mitigating factors.
You don’t need to understand all the macro reasoning to know what’s going on. The institutional view that Bitcoin is “undervalued” is built on macro and liquidity scaffolding rather than pure crypto cycle scaffolding.
In the liquidity section of the report, which makes this clear with a custom global M2 index, Coinbase states that it leads Bitcoin by 110 days and shows a 0.9 correlation with BTC’s movement in many lookback windows. Once you accept that framework, the paradox becomes easier to understand.
Looking at the regime, looking at the scars from October, looking at a market that still wants downside protection, we can conclude that Bitcoin is in a good position for the long term if policy and liquidity work as expected.
Only then will “bear market” represent today’s market behavior, and “undervaluation” represent how the market will reprice when macro inputs turn more supportive.
So what breaks this theory?
Duong rejected the idea that routine pullbacks are sufficient, instead pointing to clusters of macro and on-chain conditions that must fail at the same time.
“Financial institutions are not only focused on price, but also on the macro liquidity situation and the structure of the on-chain market.
The clearest sign that they might be wrong would not be a routine retraction but a collapse of the theory’s fundamental thrust.
In other words, it should be a cluster of signals, not just one signal.
For example, if macro liquidity conditions decisively turn against risk assets, if on-chain accumulation metrics reverse, if long-term holders diversify on the weak side, or if institutional demand metrics continue to trend negatively, the combination could meaningfully challenge the view that Bitcoin is currently undervalued or structurally supported. ”
The survey’s numbers suggest that institutions are divided on where the market is, but they agree on Bitcoin’s relative attractiveness.
The report’s graphs show how that belief is reflected in actual positioning. It means less reliance on weak leverage, more use of options for defined risks, and the market cooling down without completely breaking out.
Mr. Duong’s answer adds connective tissue to this theory showing that “undervaluation” is not a check on market mood, but a framework fixed in liquidity, structure, and duration.
Whether financial institutions are ultimately right will depend less on winning short-term debates over cycle labels and more on whether their framework holds up when the next macro test arrives.
(Tag translation) Bitcoin
