Institutional investors are sending a mixed message on Bitcoin. In a new global survey from Coinbase Institutional and Glassnode, roughly one in four respondents said crypto has entered a bear market. At the same time, a majority still described Bitcoin (BTC) as undervalued, and most reported holding or increasing exposure since October’s sharp deleveraging.
That apparent contradiction is less about confusion and more about time horizons and tooling. The data and commentary in the Coinbase–Glassnode report, alongside remarks from David Duong, Coinbase Institutional’s global head of research, suggest institutions are willing to acknowledge a tougher regime while quietly consolidating around BTC as the one asset they remain comfortable owning through it.
The paradox: bear market label, undervalued conviction
The survey headline is straightforward: a material share of institutions now classify the current environment as a bear market, yet around 70% see Bitcoin’s price as below where it should ultimately trade. Those positions can look incompatible if “bear market” is treated as a value judgment. The report frames them instead as two different assessments.
On one side is “regime language” – how investors describe the current phase of the cycle and risk appetite. On the other is “value language” – a longer-horizon view built on adoption, scarcity, market structure, and policy conditions. Duong makes that distinction explicit, arguing that when institutions talk about a bear market, they are describing positioning and behavior, not necessarily fair value.
That framing is visible in cross-asset behavior. October’s deleveraging hit altcoins hard, but Bitcoin dominance barely budged, inching from 58% to 59% in Q4 2025. The selling was concentrated in the long tail rather than a broad exit from crypto. For larger allocators, BTC functioned as the asset you keep when you are cutting risk but not abandoning the category.
The underlying message: institutions can be defensive about near-term conditions while still believing BTC is cheap relative to their notion of equilibrium. Their solution has been to change how they hold risk, not to walk away from it.
How institutions are actually positioned
The report’s positioning data shows a rotation away from the most fragile forms of leverage, not a wholesale unwind of exposure. Coinbase and Glassnode note that perpetual futures were hit hardest in the October reset, with systematic leverage falling to about 3% of total crypto market cap (excluding stablecoins). At the same time, options open interest in Bitcoin climbed as traders sought protection against further downside.
For institutional desks, that is a textbook bear-regime response. If you think conditions are hostile, you do not necessarily exit; you:
• Reduce liquidation risk by stepping back from high-leverage perps.
• Use options to define downside.
• Keep the exposure you still want in vehicles that will not force you out at the worst time.
Duong’s description of post-October behavior matches this pattern. He notes that institutional interest in on-chain expansion persisted, but in a “measured, multi-venue way,” with a growing preference for options and basis trades. Those structures offer convexity or carry without the same forced-liquidation risk that drove the October move.
In other words, institutions did not abandon BTC; they changed their instruments. The shift from perps to more controlled exposures is part of how they reconcile running risk in what many label a bear market with the belief that Bitcoin remains structurally attractive.
From perps to protection: what derivatives are signaling
The derivatives complex is where the regime change is most visible. According to the report, BTC options open interest has now overtaken perpetual futures open interest. At the same time, the 25-delta put–call skew is positive across 30-day, 90-day, and 180-day tenors.
That profile does not describe a market trying to maximize upside through leverage. Instead, it describes one that is willing to stay long but wants to cap the downside. Traders are paying up for puts relative to calls across multiple maturities, signaling demand for insurance rather than aggressive speculation.
This derivative tilt aligns with Duong’s observation that institutions are increasingly expressing views via options and basis, not through outright leveraged longs. It also helps explain how they can “stay in the game” under tougher conditions. Options and basis trades do not typically draw headlines, but they are the tools professional books use to navigate hostile regimes without exiting entirely.
On-chain metrics tell a similar, if more nuanced, story. Coinbase and Glassnode highlight entity-adjusted Net Unrealized Profit/Loss (NUPL) sliding from “Belief” into “Anxiety” in October and remaining there through the quarter. Optimism is no longer being rewarded, but the market has not capitulated.
At the supply level, the report notes that BTC that moved in the last three months rose by 37% in Q4 2025, while coins dormant for over a year fell by 2%. The authors interpret this as a distribution phase late in 2025. From an institutional perspective, distribution does not automatically mean a top; it can reflect large holders de-risking into strength and seeking a new cohort of owners willing to absorb supply without constant liquidity support.
Here, “undervalued” is less about a precise fair-value number and more about BTC’s unique capacity to absorb capital at scale. Duong draws a clear line between how institutions underwrite Bitcoin and how they view the rest of crypto. He notes that BTC is increasingly treated as a strategic store-of-value and macro hedge, rather than as just another speculative token. That separation also maps to the report’s preference for large caps over small caps heading into Q1 2026, with smaller tokens still digesting the October shock.
On‑chain sentiment and supply: anxiety, not capitulation
Zooming in on the on-chain data clarifies why institutions can be wary of the current phase while still constructive on BTC’s longer-term trajectory.
Entity-adjusted NUPL shifting from Belief to Anxiety marks a transition from confident profitability to a more cautious, but not despairing, stance. Historically, outright capitulation phases coincide with widespread realized losses and forced selling. The report does not describe that kind of washout. Instead, it depicts a market that has stopped paying for optimism but is still engaged.
The active versus dormant supply trends reinforce that reading. The increase in coins moving within three months indicates that some holders used late-2025 conditions to realize gains or de-risk. The modest decline in long-term dormant supply suggests this was a controlled distribution rather than a flood of distressed selling from long-term holders.
For institutions, this matters because it speaks to market structure. A controlled handoff from one cohort of holders to another is compatible with the idea that BTC can remain structurally supported. If new holders can absorb supply without an escalating need for leverage or retail inflows, the foundation for a longer-term “undervalued” thesis remains intact even as prices struggle in the short run.
In this framework, calling the current environment a bear market is a statement about sentiment and realized flows; calling BTC undervalued is a statement about the resilience of its ownership base and the belief that it is the only crypto asset that can support institutional-sized allocations through a difficult regime.
Liquidity vs the four‑year cycle: what really drives value
The other pillar of the institutional thesis is the time horizon – and what investors believe actually drives Bitcoin’s cycles. The report and Duong both downplay the idea that halvings alone dictate market structure.
Duong argues that the four-year cycle still matters as a behavioral template: institutions look at where BTC trades relative to prior highs and lows, halving dates, and typical drawdown/recovery patterns. Those levels affect positioning and sentiment. But as a causal model, he describes halving-driven narratives as weak, noting that there are only four historical observations and that each has been heavily confounded by major macro and policy shifts such as quantitative easing and COVID-era stimulus.
In Coinbase’s 2026 outlook, the team explicitly questions the economic relevance of the halving once liquidity, interest rates, and dollar dynamics are taken into account. The report instead grounds its BTC view in macro and liquidity data.
It points to U.S. December CPI holding at 2.7% and the Atlanta Fed’s GDPNow estimate of 5.3% real GDP growth for Q4 2025. The base case assumes the Federal Reserve delivers the two rate cuts – 50 basis points in total – that are currently priced into fed funds futures. The authors see that as a potential tailwind for risk assets, including BTC.
The report also flags a notable cooling in the jobs market: 584,000 jobs added in 2025 versus 2 million in 2024. It links part of that shift to AI adoption. Regardless of whether one agrees with every macro inference, the direction is clear: institutions are evaluating Bitcoin through the same macro lens they apply to other risk assets.
The liquidity section makes that explicit. Coinbase presents a custom Global M2 index that it says leads Bitcoin by roughly 110 days and shows a 0.9 correlation with BTC across multiple look-back windows. If that relationship holds, BTC’s long-duration setup depends far more on the evolution of global money supply and policy conditions than on the rigid cadence of halvings.
Seen through this macro-and-liquidity scaffold, the paradox dissolves. A market can trade like a bear – scarred by an October reset, cautious on risk, hungry for downside hedges – while BTC still screens as attractive on a 12–24 month view if liquidity is expected to improve and policy risks look manageable.
What would break the ‘undervalued BTC in a bear regime’ thesis?
If institutional conviction rests on liquidity, structure, and time horizon, the failure mode has to show up across those same dimensions. Duong is explicit that a routine pullback in price would not be enough to dislodge the thesis. Instead, he points to a cluster of conditions that would have to deteriorate together.
On the macro side, a decisive turn in liquidity against risk assets – for example, tighter-than-expected policy or a sustained contraction in global money supply – would challenge the view that BTC sits in a favorable long-duration setup. On-chain, a reversal in accumulation metrics or long-term holders distributing into weakness, rather than into strength, would signal structural stress rather than healthy rotation.
Institutional demand itself is another key variable. If indicators of large-scale participation were to trend persistently negative, that would undercut the idea that BTC can absorb capital in size without a constant retail bid or fragile leverage.
Crucially, Duong frames this not as a single trigger but as a confluence of signals: worsening macro liquidity, deteriorating on-chain accumulation, long-term holders selling into weakness, and a sustained drop in institutional engagement. Only that combination would meaningfully challenge the notion that BTC is both structurally supported and mispriced relative to its long-run equilibrium.
For now, the Coinbase–Glassnode survey and data describe a more nuanced landscape. Institutions are divided on whether the current phase formally qualifies as a bear market, but they are broadly aligned in treating Bitcoin as the relative winner within crypto. They have shed the most fragile leverage, migrated toward options and other defined-risk structures, and accepted that the market is no longer paying for indiscriminate optimism.
Whether the “undervalued BTC in a bear regime” thesis holds will depend less on debates over cycle labels and more on whether the underlying liquidity and on-chain structures stay intact when the next macro test arrives. Institutions are not just betting on price; they are betting that their framework – anchored to macro inputs and market plumbing rather than to a four-year calendar – proves to be the right one.