Bitcoin $200,000 Dream Shattered in 2025: From Algorithm Cycles to Institutional Pricing Power Shift

The optimistic expectations at the end of last year have vanished into thin air. With the arrival of January, those Wall Street voices who confidently announced a “$200,000 target” have all changed their tune—former bull flag bearer Tom Lee quietly downgraded his year-end forecast from $250,000 to a “possibly recovered” $125,100 USD. This is not a simple numerical adjustment but a collective failure of the entire market prediction system.

Why is the consensus so fragile?

In early 2025, the Bitcoin market formed a rare unified expectation. From institutional analysts to opinion leaders, everyone was telling the same story: halving reduces supply, institutional ETF funds flood in, macroeconomic conditions improve. The entire market was immersed in the dream of “supply shock.”

But reality gave the market a slap. Although Bitcoin repeatedly hit new highs, the price plunged into intense volatility after breaking $122,000 in July. By the end of the year, when the price still hovered around $90,200, market sentiment plunged into despair—fear index dropped to 16 points, the most extreme panic since the COVID-19 pandemic in 2020.

This extreme divergence between price and sentiment indicates a fundamental shift in market driving forces.

The shift in Bitcoin pricing power: from miner algorithms to institutional financial basis

Diving into on-chain data for 2025, the truth becomes clear:

Institutional buying has completely overwhelmed miner supply.

After the halving, Bitcoin’s daily issuance dropped to about 450 BTC (then approximately $40M USD). But according to data, in 2025, institutions purchased a total of 944,330 BTC, while miner new production was only 127,622 BTC. A simple division shows: institutional purchases are 7.4 times the miner supply.

What does this imbalance mean? It means that the price floor of Bitcoin is no longer determined by mining economics but by institutional cost basis.

The current average cost basis for US spot ETF holders is about $84,000 USD—this has become the market’s most critical support level. But at the same time, it is also a sensitive “anchor.” The performance evaluation cycle for institutional fund managers is 1-2 years, with bonuses settled on December 31. As the year-end approaches and returns lack buffer, they tend to sell the riskiest positions.

This behavioral pattern is generating a new market rhythm: The first year is an accumulation and upward phase, with new funds flowing into ETFs pushing prices higher; the second year becomes a distribution and reset phase, where performance pressure leads to profit-taking until a new, higher cost basis is established.

We are witnessing a transition from a 4-year halving cycle to a 2-year institutional cycle.

Macro background: The Fed’s silence changes everything

Beyond structural market changes, a deeper force is the reversal of liquidity conditions.

At the beginning of the year, the market expected the Federal Reserve to start cutting rates from mid-2024. This expectation was a core driver supporting Bitcoin’s rise. But recent data and officials’ statements have rewritten this story: US employment has slowed but remains solid, inflation has receded but not enough to support significant easing. Some Fed officials have even hinted at “cautious rate cuts.”

The cooling of rate cut expectations directly depresses the discount value of risk assets, with Bitcoin, as the most flexible risk asset, bearing the brunt.

On-chain structure: What is it saying?

By the end of 2025, on-chain snapshots reflect a profound wealth reshuffle:

Mid-tier whales (holding 10-1,000 BTC) continue to net sell, typically profit-taking long-term players. In contrast, super whales (>10,000 BTC) are increasing holdings, with some strategic long-term institutions accumulating at lows.

Retail also shows divergence: newcomers panic and exit, while experienced retail investors are bottom-fishing. The result: Selling pressure mainly comes from weaker hands, and Bitcoin is gradually consolidating into stronger holders.

Technical signals warning

From a technical perspective, Bitcoin stands at a crossroads. The consensus among analysts is: if it cannot hold $92,000, this recovery may be over.

A more dangerous signal comes from the derivatives market. As of late November, a large number of open positions are concentrated in $85,000 put options and $200,000 call options. This extreme positioning indicates unprecedented divergence in market expectations for the future direction.

Technical patterns show Bitcoin forming a wedge contraction, a bearish signal. If it breaks down, it could retest the November low of $80,540, and further down, possibly touch the 2025 full-year low of around $74,500.

The ripple effects of the AI bubble

Another often overlooked force: the rise and fall of AI assets.

AI has become the dominant force in global risk asset pricing, with its volatility directly affecting Bitcoin through risk budgets and liquidity conditions. More profoundly, narrative competition—AI’s grand story has overshadowed the entire crypto industry’s discourse space. Even with healthy on-chain data and active development ecosystems, Bitcoin still struggles to command valuation premiums.

Once the AI bubble enters a correction phase, the liquidity, risk appetite, and resources released could flow into other risk assets, including Bitcoin. This “re-pricing moment” could be the key variable for 2026.

Lessons from failure

The collective failure of Bitcoin forecasts in 2025 essentially reflects the market’s collective adaptation to a profound structural shift.

The old halving cycle framework has become invalid, replaced by a dual-driven regime of institutional financial schedules and global liquidity tides. The key to price is no longer the halving date but the global liquidity turning point and the profit-and-loss statements of institutional fund managers.

As the market shifts from miner mechanical selling to fund managers’ selective profit-taking, the predictive rules change. Those still fixated on halving are destined to be proven wrong again. What truly matters to track is the resilience of the $84,000 institutional cost line and the next moves in global central bank liquidity.