Author: Will Clemente, Bitcoin on-chain analyst. Translation: Jiahua, ChainCatcher.
Will Clemente used a new long-form note to lay out how he is thinking about Bitcoin now and how he may choose to allocate to it going forward. He said that over the past year he shifted much of his market focus toward commodities because crypto had become weighed down by oversupply, weak demand, and a lack of meaningful innovation outside a few pockets such as Hyperliquid.
He had expected a possible window for relative Bitcoin strength late last year, when small-cap stocks were rallying and gold had just gone through a strong run. Instead, Bitcoin only produced what he described as a failed breakout in the days before Oct. 10, a result he called deeply disappointing. In January this year, with market action resembling the 2022 bear market, he cut the rest of his Bitcoin exposure further.
His assessment is blunt: this has not been an enjoyable year for anyone focused on Bitcoin or crypto more broadly. The percentage drawdown from the highs has been milder than the previous cycle, but in many ways he sees this bear market as even harder to sit through than 2022.
A frustrating backdrop for Bitcoin
Clemente contrasted the current market with 2022, when the reasons for the selloff were easier to identify: rising interest rates, the clearing out of leverage and fraud, and the collapse of FTX. At that time, investors could at least form a clean long-term thesis that if those pressures began to ease, Bitcoin could become attractive again.
He does not think the same logic applies cleanly today. In his view, two exceptions stand out: digital asset treasury companies, or DATs, and quantum computing risk. He said both have been important overhangs on sentiment, though both are now starting to show some signs of repair.
Bitcoin ETFs currently hold about $50 billion in assets, he wrote. Those products set inflow records after launch and were only overtaken earlier this year by memory ETFs. Large financial institutions have also started rolling out Bitcoin-related lending products. On paper, last year should have been a strong setup for Bitcoin, especially with gold performing exceptionally well on central bank reserve demand and de-dollarization narratives.
But Bitcoin did not respond the way many expected. Clemente said nearly any retail or institutional investor who wants Bitcoin exposure now has a channel to get it. Even so, Bitcoin ETFs posted $5 billion in net outflows over the past year, while DRAM-related products brought in $10 billion in one month. He called that contrast especially disappointing.
Network health: weaker hash rate, but no collapse in structure
When discussing Bitcoin fundamentals, Clemente avoided traditional financial metrics and focused instead on the condition of the network itself. He argued that decentralization still has real value in an increasingly centralized world shaped by state-led economies, state-influenced markets, and major technology companies.
He explained the split between miners and nodes. Nodes enforce the rules and validate the network, while miners secure it through energy-intensive computational work. Nodes are spread across the world, and he noted that many may not even be easily traceable. One list he cited covers nearly 200 countries.
Independent miners are much harder to track directly, so hash rate serves as the better aggregate measure of the energy being committed to the system. By that measure, Bitcoin network hash rate is falling. Clemente said miner margins have been squeezed since 2022 by heavier competition and higher energy prices. More important, many mining companies have been redirecting resources into artificial intelligence and high-performance computing, or AI/HPC. So far, he said, that has proven to be a prudent business decision for listed miners that made the shift.
That trend has fed on itself. Bitcoin has lagged AI-related assets, while demand for compute has grown rapidly, reinforcing the migration toward AI/HPC.
He sees two ways to read this.
- The bearish interpretation is that the network is less secure on a technical basis because the amount of energy committed to securing it has fallen. As a digital commodity, the value of the energy input behind each unit of Bitcoin, in other words production cost, has fallen as well.
- The bullish interpretation is that even though nearly all known public miners are pivoting toward AI/HPC, hash rate has only fallen back to mid-last-year levels. To Clemente, that suggests the set of actors still mining Bitcoin and sourcing cheap energy may be larger than many assumed.
He added an important qualification. Bitcoin is not in crisis because its difficulty adjustment mechanism remains intact. The network automatically adjusts mining difficulty and reward conditions roughly every two weeks based on available hash rate. When competition drops, that mechanism creates room for new miners to step in. Combined with the available node distribution data, Clemente said the network still looks decentralized and healthy overall.
Valuation signals point to the lower end of the historical range
Bitcoin does not generate cash flow, Clemente wrote, but that does not mean it cannot be valued in relative historical terms.
On the technical side, he said Bitcoin is consolidating near its 2021 prior high and sitting slightly below the 200-week exponential moving average, or EMA. Weekly RSI has produced a bullish divergence out of oversold territory, and the last time it reached a similar oversold extreme was at the deepest part of the previous bear market.
Historically, he said, the 200-week moving average has served as a useful base threshold for beginning to accumulate spot Bitcoin gradually.
Among on-chain valuation frameworks, he singled out market value to realized value, or MVRV, as one of the most effective indicators. The metric compares Bitcoin’s current marginal trading price with the network’s aggregate cost basis, which is derived from the price when coins last moved to a new wallet cluster.
When the ratio is high, the marginal trading price sits far above the average network cost basis, leaving the market with substantial unrealized profit and a stronger incentive for holders to take gains. When the ratio drops below 0, the market as a whole is underwater on a floating basis. Historically, he said, that has usually marked a better accumulation phase.
Clemente noted that in 2024 and 2025, the metric never reached the kind of manic top readings seen in earlier cycles. To him, that reflects a more mature asset class with lower volatility. Since each bull market has tended to produce lower indicator peaks while each bear market low has drifted modestly higher, he said the reasonable conclusion may be that this cycle does not necessarily need to go negative to form a bottom.
His core takeaway is simple: buying the exact low is extremely difficult, but Bitcoin already sits near the lower end of its historical valuation range.
He also said long-term holders appear to be accumulating fairly aggressively. After a sustained phase of distribution in the second half of 2025, they have started adding again, which he reads as a sign that this cohort sees value at current levels.
Trading activity, by contrast, has dried up. Clemente cited a chart by @n3ocortex showing that spot turnover relative to market capitalization has fallen to an all-time low. ETF and DAT trading volumes show a similar pattern. Front-month implied volatility in options has dropped to the lowest level in years, suggesting the market sees Bitcoin as dead money in the near term, while options skew shows that the only clear demand over the past year has been for more downside protection.
He also pointed to futures basis, the spread between forward Bitcoin contracts and spot prices, which has been falling for years and is now struggling to match U.S. Treasury bill yields. That implies two things at once: more funds are arbitraging Bitcoin futures basis, and the market is not assigning much premium to forward Bitcoin prices over spot.
Taken together, Clemente said, the picture is one of a market that has gone quiet. Traders in both futures and options are not expressing a bullish view, and prices are being set for continued volatility compression. At the same time, several indicators place Bitcoin in deep value territory, while long-term holders are accumulating again. That stands in sharp contrast to the $5 billion in net outflows from Bitcoin ETFs over the past 52 weeks.
DATs and quantum computing remain the main overhangs
Clemente described digital asset treasury companies as one of the biggest sources of pressure during the 2023-2025 bull market. In theory, those structures are meant to dilute common shareholders in a way that increases value per share, letting companies accumulate more Bitcoin and eventually improve shareholder value.
After Strategy and Japan’s Metaplanet found success, however, many similar companies rushed in to compete for the same return opportunity. Capital flows were spread across a larger group of issuers, and their premiums to net asset value kept narrowing.
Over the past few months, he said, the market has already seen several developments: some treasury companies have slowed their Bitcoin accumulation, some have started selling Bitcoin directly, and a small number have changed strategy altogether. He views those changes as constructive signs of self-repair in the market.
He pointed to a recent example in which Bitcoin rose even after Saylor announced a Bitcoin sale. According to Strategy’s latest earnings call, the company is consolidating its capital structure and giving STRC a higher priority. Clemente contrasted that with the earlier phase when Bitcoin would often fall after a new purchase announcement.
Looking ahead, he said DATs are unlikely to exert the same degree of pressure they did six to nine months ago, especially with Bitcoin already down more than 50% from its high.
Quantum computing is the other major risk in his framework. Clemente said plainly that it is a real concern, especially on a time horizon of more than five years. In recent months, while helping with investment analysis at STIX, he said he had exposure to several quantum computing startups that are just beginning to mature and had discussions with people in the field. He stressed that he is not an expert.
Still, his conclusion is that the threat should be taken seriously. At the same time, with Bitcoin at $60,000, down 50% from the highs and lagging other assets, he believes a substantial amount of that risk is already reflected in price.
From here, even under highly negative scenarios, he argued that these widely discussed concerns are more likely to become less bad than worse. The more Bitcoin underperforms because of fears around quantum risk, the more incentive large holders and institutions with trading, custody, and lending businesses have to push developers toward workable solutions.
He compared that setup to the previous cycle around ETF approval: markets tend to price the probability of a problem being solved before the solution is complete. Once the risk is fully neutralized, the chance to buy at very depressed levels may already be gone.
What could matter over the next few months
Clemente said that even if Bitcoin has reached a level suitable for long-term allocation, opportunity cost remains a serious issue for short- and medium-term capital. The economy is running hot, there are genuine innovation themes elsewhere in markets, and allocating to Bitcoin may feel like missing more active trades.
That leaves a central question. If gold is up this year and high-beta stocks have also performed well, why has Bitcoin failed to follow, and what would need to happen for that to change now?
His answer is that a dramatic catalyst may not be necessary. On-chain data already suggests long-term holders are buying aggressively. DATs appear to be going through capitulation-style cleanup, while ETFs have been a meaningful source of net selling pressure. In prior Bitcoin bear markets, he wrote, bottoms were often formed when sellers were exhausted rather than when a powerful new demand catalyst arrived.
So his framing is straightforward: if investors who were worried about DATs, quantum computing, or Bitcoin’s relative underperformance have already had many months to sell, how many are left who can keep dumping at a pace greater than what the market has already absorbed over the past six to nine months?
He did not dismiss downside risk. A macroeconomic or geopolitical shock could still trigger a sharp drop if cross-asset correlations rise suddenly. But his discussion is focused on the next several months, not on day-to-day swings.
Clemente also acknowledged that no clean catalyst is visible right now. The Clarity Act might count, though he said he does not expect it to have a major direct effect on Bitcoin itself. In his view, that is often what bottoms look like. The question is not whether the narrative feels inspiring, but how much room remains for conditions to get worse relative to what current prices already imply.
He said he does not rule out one final leg down at some point this year. Still, his broader view is that many of the major risks have already been priced in over the past year.
One possible catalyst, in his opinion, is simply steady institutional buying under standing allocation rules. ETF assets under management surged after launch, but that first wave of enthusiasm has passed. Since last October, aggregate ETF AUM has been drifting lower.
A potential next phase would be for large asset managers to add a very small, single-digit percentage allocation to Bitcoin across portfolio offerings. That kind of flow would be relatively insensitive to price and could matter more than a short burst of speculative buying.
He admitted that this can sound like an attempt to force a bullish narrative. Even so, he said Bitcoin has shown little clear correlation with many other assets over the past year, and that alone may provide a rational case for large managers that want to diversify portfolio correlation and risk exposure.
How he is thinking about allocation now
Clemente ended with a concise summary of his view: Bitcoin is cheap, even if it may still go down another step later this year. The network remains broadly healthy. Most of the key risks are already reflected in price, and many of the investors who would have sold on those risks have probably already done so. Waiting for the perfect bottom is unrealistic.
From there, he outlined several possible approaches, while stressing that none of this should be taken as investment advice.
- The simplest approach is to accumulate spot Bitcoin gradually through dollar-cost averaging over the coming months.
- Another is to wait either for a final washout or for clear evidence that momentum and market participation have returned.
- A third is to begin building a position now while using options, with implied volatility currently very cheap, to hedge any final decline that might otherwise force an exit.
He added that he has not fully pulled the trigger yet, but will likely begin acting in some form soon.
Clemente closed by saying he hopes the note adds something useful to the discussion about how investors should think about Bitcoin from here. He ended on a lighter line, writing that perhaps the four-year cycle proves everyone lives in a simulation. Either way, he said, the orange coin looks set to remain interesting over the next few months.