Bitcoin, despite falling below $100,000... "Could set a new record by year-end"

Investor sentiment weakens amid shutdown and AI rally slowdown

Despite the bear market, industry says "it will rebound soon"

Bitcoin (BTC) ultimately failed to hold the $100,000 level. A prolonged U.S. federal government shutdown and a slowdown in the artificial intelligence (AI) rally affected the crypto asset (cryptocurrency) market. However, the market still expects a possible year-end rebound based on continued exchange-traded fund (ETF) inflows, institutional buying, and expectations of increased liquidity.

On the 4th (local time), based on Binance Tether (USDT) markets, Bitcoin fell intraday to $98,944, dropping below the $100,000 level for the first time since June. This is about 21% lower than the record high ($126,200) recorded last month. Bitcoin has partially recovered losses and is currently trading in the $102,000 range.

The background to this decline has been attributed to concerns over frozen market liquidity due to the prolonged U.S. federal government shutdown. The U.S. federal government saw a temporary budget bill rejected that day, effectively extending the shutdown to a new record (35 days).

In addition, the 'bubble theory' around the AI-led stock rally also had an impact. CNBC reported that "major crypto assets share the same investor base as AI-related stocks, so if one side wobbles, the other tends to move in tandem." As AI investment sentiment weakened, selling spread across risk assets including Bitcoin.

However, the industry remains optimistic that Bitcoin could reach a new all-time high as early as year-end. Analyses note continued inflows of institutional funds and that the market may already be "near the bottom."

Matt Hogan, Chief Investment Officer (CIO) at Bitwise, said, "Retail investors have entered an extreme fear zone, but this could be a sign that the bottom is near," and added, "Institutions and financial advisers still maintain interest in Bitcoin, and ETF inflows remain steady."

He said, "While leveraged liquidations and retail investor departures continue, the institution-centered market still maintains a bullish trend," and forecasted, "It is highly possible that Bitcoin will record a new all-time high by year-end. Recovery to the $125,000–$130,000 range is a realistic target."

Jerry O'Shea, Global Market Insights Manager at Hashdex, explained, "Expectations that further rate cuts this year are unlikely, along with concerns about tariffs and an overvalued AI stock market, led to a broad market decline," and added, "$100,000 is a psychological support level, but even if it is breached, the long-term investment thesis for Bitcoin remains valid."

He continued, "ETF inflows and the trend of increased corporate adoption of crypto assets are continuing strongly. If the U.S. Federal Reserve (Fed) ends quantitative tightening (QT) and expands liquidity, Bitcoin is likely to test new all-time highs again within the coming months," he added.

Arthur Hayes, Chief Investment Officer (CIO) at Maelstrom, also assessed that the Fed's 'stealth quantitative easing (stealth QE)' could reignite a Bitcoin bull market.

CIO Hayes said, "Stealth QE is about to begin," and added, "If current short-term money market tensions continue and government bond issuance increases exponentially, the Fed's short-term lending facility (SRF) balance will inevitably rise."

He said, "If the SRF balance increases, global dollar liquidity will expand, which could spark a rise in Bitcoin," and warned, "Some investors are mistakenly selling, thinking the current bear market is the top." He also said, "The market will remain unstable until the U.S. government shutdown ends, but if QE begins and liquidity is unleashed, the Bitcoin bull market will reignite."