The Real Cause: Weak Demand and Tightening Global Liquidity

Coutts’s core argument is straightforward. He states that Bitcoin’s reversal was driven by weak demand and global liquidity tightening, which he considers the dominant force shaping prices across Bitcoin and all risk assets . He explicitly rejects the popular narrative that blames Michael Saylor or Strategy’s debt-funded Bitcoin purchases for the drawdown .

“Market reversals are not usually caused by just one company, but by market-wide forces such as liquidity and overall demand,” Coutts explained .

Van de Poppe, who interviewed Coutts, highlighted that the broader market simply lacked enough buyers to sustain higher prices . Coutts’s central framework is his Global Liquidity Index, which shows a robust correlation: roughly a 1% increase in global liquidity moves Bitcoin by about 20% .

Long-Term Holder Selling Has Already Peaked

Coutts notes that long-term holder selling peaked in Q3 of 2025 — a classic signal that often marks a cycle top . He now believes an earlier risk-model warning from his framework may have already flagged the cycle top, and that the subsequent 30% to 40% correction was consistent with that signal .

In other words, the selling pressure from those who held Bitcoin for years has already been absorbed by the market. The question is when new demand will emerge to replace it.

Structural Headwinds: Government Debt and AI Capital Absorption

Coutts identifies two major structural forces that are absorbing capital that might otherwise flow into crypto, acting as persistent headwinds :

• Rising US government debt: As US debt grows faster than M2 money supply, it competes for the same capital that could go into risk assets like Bitcoin .
• AI-related capital raising: Private fundraising, AI share buybacks, and borrowing for AI infrastructure are all diverting capital away from crypto . Coutts has noted that AI wasn’t around in the last crypto cycle and has “really ramped up” in 2025 as a competing narrative .

The Key Catalysts for Recovery

Coutts’s outlook is not purely bearish. He identifies several specific catalysts that could set the stage for a renewed rally:

Looser Monetary Policy

This is the most important condition. Coutts argues that a looser monetary policy — central banks pivoting to rate cuts or quantitative easing — would set the necessary conditions for a Bitcoin and altcoin rally . He believes rising deficits are backing the Federal Reserve into a corner on rates, and that the next leg of global liquidity growth is close .

“Central banks, if (when) they reverse their balance sheet tightening, will set off another leg higher — with the move likely accentuated in altcoins,” Coutts wrote on X .

Tokenization of Real-World Assets

Coutts identifies tokenization as a structural catalyst that could create genuine new demand for crypto networks, distinct from speculative trading .

Autonomous AI Agents

He points to autonomous AI agents as a future catalyst, noting they could create organic, programmatic demand for blockchain-based services and transactions .

Mid-2026 as a Potential Cycle Inflection

Coutts’s data suggests mid-2026 could mark the cycle low . Key factors supporting this view include:

• The Treasury General Account drain, which removed approximately $550 billion from markets, is now complete .
• The business cycle expansion is still not fully underway (ISM at 49 versus expected 55+) .
• Coutts’s own base case sits at $200,000 to $250,000 for Bitcoin over a two-to-three-year window .

Summary: A Liquidity-Driven Downturn with a Path to Recovery

In Coutts’s view, the current Bitcoin downturn is liquidity-driven and late-cycle. Recovery hinges on global central bank loosening and longer-term adoption catalysts like tokenization and autonomous AI agents — all while structural capital competition from government debt and AI spending persists. The data, he argues, points to mid-2026 as a potential pivot point for a new leg higher.

The Real Cause: Weak Demand and Tightening Global Liquidity

Coutts’s core argument is straightforward. He states that Bitcoin’s reversal was driven by weak demand and global liquidity tightening, which he considers the dominant force shaping prices across Bitcoin and all risk assets . He explicitly rejects the popular narrative that blames Michael Saylor or Strategy’s debt-funded Bitcoin purchases for the drawdown .

“Market reversals are not usually caused by just one company, but by market-wide forces such as liquidity and overall demand,” Coutts explained .

Van de Poppe, who interviewed Coutts, highlighted that the broader market simply lacked enough buyers to sustain higher prices . Coutts’s central framework is his Global Liquidity Index, which shows a robust correlation: roughly a 1% increase in global liquidity moves Bitcoin by about 20% .

Long-Term Holder Selling Has Already Peaked

Coutts notes that long-term holder selling peaked in Q3 of 2025 — a classic signal that often marks a cycle top . He now believes an earlier risk-model warning from his framework may have already flagged the cycle top, and that the subsequent 30% to 40% correction was consistent with that signal .

In other words, the selling pressure from those who held Bitcoin for years has already been absorbed by the market. The question is when new demand will emerge to replace it.

Structural Headwinds: Government Debt and AI Capital Absorption

Coutts identifies two major structural forces that are absorbing capital that might otherwise flow into crypto, acting as persistent headwinds :

• Rising US government debt: As US debt grows faster than M2 money supply, it competes for the same capital that could go into risk assets like Bitcoin .
• AI-related capital raising: Private fundraising, AI share buybacks, and borrowing for AI infrastructure are all diverting capital away from crypto . Coutts has noted that AI wasn’t around in the last crypto cycle and has “really ramped up” in 2025 as a competing narrative .

The Key Catalysts for Recovery

Coutts’s outlook is not purely bearish. He identifies several specific catalysts that could set the stage for a renewed rally:

Looser Monetary Policy

This is the most important condition. Coutts argues that a looser monetary policy — central banks pivoting to rate cuts or quantitative easing — would set the necessary conditions for a Bitcoin and altcoin rally . He believes rising deficits are backing the Federal Reserve into a corner on rates, and that the next leg of global liquidity growth is close .

“Central banks, if (when) they reverse their balance sheet tightening, will set off another leg higher — with the move likely accentuated in altcoins,” Coutts wrote on X .

Tokenization of Real-World Assets

Coutts identifies tokenization as a structural catalyst that could create genuine new demand for crypto networks, distinct from speculative trading .

Autonomous AI Agents

He points to autonomous AI agents as a future catalyst, noting they could create organic, programmatic demand for blockchain-based services and transactions .

Mid-2026 as a Potential Cycle Inflection

Coutts’s data suggests mid-2026 could mark the cycle low . Key factors supporting this view include:

• The Treasury General Account drain, which removed approximately $550 billion from markets, is now complete .
• The business cycle expansion is still not fully underway (ISM at 49 versus expected 55+) .
• Coutts’s own base case sits at $200,000 to $250,000 for Bitcoin over a two-to-three-year window .

Summary: A Liquidity-Driven Downturn with a Path to Recovery

In Coutts’s view, the current Bitcoin downturn is liquidity-driven and late-cycle. Recovery hinges on global central bank loosening and longer-term adoption catalysts like tokenization and autonomous AI agents — all while structural capital competition from government debt and AI spending persists. The data, he argues, points to mid-2026 as a potential pivot point for a new leg higher.