Wolfe Research reiterated a bearish stance on Bitcoin following a sharp pullback in the digital asset's price. The research house said the cryptocurrency declined about 20% after failing to clear its 200-day moving average, and that the firm had anticipated such a correction because it viewed the prior price gain as a bear-flag technical formation.
The firm reported that Bitcoin is now trading in oversold territory after its inability to sustain a move back above the 200-day average. Wolfe also observed that Bitcoin has become disconnected from technology stocks and broader risk assets, a departure from periods when the cryptocurrency moved more in step with other risk-on instruments.
In its assessment, Wolfe Research argued that Bitcoin no longer operates as an inflation hedge and cited what it described as declining real-world applications for the asset. The firm suggested that other areas of the market - notably artificial intelligence and semiconductor equities - may be absorbing excess liquidity that might otherwise flow into crypto. Wolfe pointed to investors' preference for semiconductor stocks that have, in the firm's view, tripled in value within a matter of weeks.
Wolfe continues to rely on a four-year cycle framework for its price forecast. Using an average peak-to-trough interval of 381 days and an average drawdown of 79%, the research house projects Bitcoin will reach a bottom that is below $40,000 in late October 2026.
The firm said these cycle-based targets remain intact despite a market backdrop in which major U.S. stock indexes have hit record highs for several weeks, driven by gains in the technology sector. Wolfe's commentary underscores a divergence between the crypto market's technical trajectory and the strength seen in parts of the equities complex.
Context and takeaways
Wolfe's outlook is grounded in technical signals and an historical cycle average. The firm highlights flows into AI and semiconductor stocks as a countervailing market force and frames Bitcoin's recent price action as consistent with a continued downtrend under its cycle assumptions.