Bitcoin’s Fabian Dori, chief investment officer at Sygnum Bank, said that as the cryptocurrency market faces a liquidity crunch and a severe emotional breakdown, volatility is likely to continue to rise in the short term and prices may fall further.
But he believes the long-term outlook remains intact.
“We can see volatility remaining high in the short term and prices could even move lower,” Dori told CoinDesk. “Market sentiment has collapsed. Investors have very limited trust and confidence to build exposure.”
The divergence between gold, which has been strong recently, and innovative assets like Nasdaq tech stocks and Bitcoin highlights the fragility of the current environment. Yet Dolly warns against looking for a single explanation.
“There is no single cause, indicator or driver behind this gap,” he said. “These are some of the elements that have been building over recent months.”
Cryptocurrency markets have been trending lower in recent months, with Bitcoin and other major coins retreating from earlier highs as macro headwinds and uneven institutional flows weighed on sentiment. Sticky inflation and shifting expectations for Fed rate cuts have dampened risk appetite, while cyclical geopolitical conflicts have reinforced a broader exit from speculative assets. At the same time, lower liquidity in volatile exchange-traded funds (ETFs) and rounds of leveraged liquidations amplified the downward trend, leaving prices struggling to regain momentum and repeatedly test key support levels.
thin ice
Dori believes that cryptocurrencies have been “walking on thin ice” for some time.
Long-term holders are increasingly wary of Bitcoin’s four-year cycle and the risk of entering a correction phase. This cautious attitude makes the foundation of the ecosystem more fragile, with fewer strong players willing to absorb fluctuations.
On top of that are cryptocurrency-specific liquidity pressures and broader macro pressures.
Since June last year, the U.S. Treasury Department has issued notes and notes, significantly increasing the balance of the Federal Reserve’s Treasury General Account (TGA). When these notes are issued, liquidity is effectively taken out of the market and becomes idle.
“They are unproductive assets,” Dorie said. “And cryptocurrencies, as one of the most liquidity-sensitive asset classes, are among the most affected.”
He said that the record liquidity event on October 10 further suppressed the risk appetite of investors and market makers, accelerating the deterioration of cryptocurrency market depth. Financing rates plummeted and liquidity conditions worsened.
Meanwhile, concerns ranging from Bitcoin’s store-of-value narrative to quantum computing risks, digital asset treasuries being forced to sell reserves and delays in U.S. legislation, including the much-anticipated Clarification Act, are fueling uncertainty.
With market sentiment already fragile, even minor headlines can now trigger large price moves.
“Ecosystems are already on thin ice because of cyclical dynamics,” Dorie said. Then add in additional liquidity constraints and an emotional breakdown, and it’s a very fragile setup, he added.
Since early October, Bitcoin is down approximately 40% to 50% from its recent highs. The last time markets experienced a decline of this magnitude was during a systemic crisis in 2022, raising new concerns about broader structural risks.
Dolly rejects the comparison.
“From a macro perspective, regulatory clarity, institutional adoption and counterparty soundness, the situation today is completely different than it will be in 2022,” he said. “This is not the same systemic risk environment.”
Liquidity turn?
Dorie believes the current weakness reflects a short-term liquidity crunch rather than changes in fundamentals.
He said market data showed empirical signs of improvement beneath the surface.
The U.S. business cycle is expanding. The Institute for Supply Management (ISM) service activity has expanded in recent months and manufacturing data has unexpectedly risen, which is historically a prerequisite for improving risk appetite.
At the same time, headline inflation remains above the Fed’s 2% target but nowhere near the levels that have previously raised serious concerns about trade policy or tariffs. Dory said the trend appears benign enough for the Fed to continue its rate-cutting cycle in the coming months.
“This will improve liquidity conditions again,” he said.
Dorie added that Treasury-driven liquidity pressures may also ease, setting the stage for a better-than-expected turnaround ahead of the next Federal Open Market Committee meeting.
From a crypto-native perspective, the fundamentals remain constructive. Stablecoins continue to grow, their integration with traditional finance continues to expand, and the number of native tokens locked on networks like Ethereum and Solana remains strong.
Institutional adoption, while uneven, is still progressing.
“Once sentiment normalizes and liquidity conditions improve, the gap between traditional assets and cryptocurrencies should narrow again,” Dori said.
Looking for triggers
For now, however, emotion is the dominant force.
Fear and greed indicators are at extremely fearful levels, underscoring how little appetite there is to rebuild risk exposure. “This clearly shows that trust and confidence are very limited,” Dorie said. “We need some kind of trigger.”
What that catalyst might be is less clear.
He said that the passage of comprehensive encryption legislation in the United States, such as the Clarification Act, would be “an extremely positive development.” Normalizing geopolitical tensions may also help revive broader investor interest.
Additional impetus may come from improved concerns related to artificial intelligence and sustainability. At the same time, further recovery in liquidity conditions, coupled with continued institutional inflows, will strengthen the constructive case.
Until then, the market remains exposed to risks.
Dori said the short-term outlook is not optimistic due to market sentiment. But he still believes the structural foundations are stronger than they appear.
“Fundamentally, we are seeing improvements in business cycle data, stablecoin growth, institutional participation and stronger counterparty risk management,” he said. “This is very different than what we will see in 2022.”
In Dori’s assessment, Bitcoin’s current plunge is less a judgment on its long-term viability than a result of shaken liquidity mechanisms and confidence.
Volatility is likely to increase before fading. Prices may even test lower levels. However, if liquidity conditions ease and macro data continues to hold up, Dory believes the shift could come sooner than many expect.
For now, cryptocurrencies remain on the fringes. But he believes fundamentals are quietly improving beneath the surface.
Read more: Bitcoin is in trouble, but JPMorgan says new legislation could be the ultimate spark
