Bitcoin Tests $87K Support as 70% of Institutions Signal Undervaluation Amid Safe-Haven Flight

Institutional Conviction Clashes With Market Reality

A striking disconnect has emerged in Bitcoin markets: while 71% of institutional investors believe BTC is undervalued at current levels between $85,000-$95,000, the cryptocurrency continues to behave as a risk asset during periods of market stress rather than the safe haven many had predicted ^[1]. This divergence reveals a fundamental tension in Bitcoin's market positioning—institutions see long-term value, but short-term price action suggests traders are treating it like tech stocks, not digital gold. As geopolitical tensions escalate and traditional safe havens like gold surge past $5,000 per ounce, Bitcoin's 30% decline from its October all-time high of $126,080 raises critical questions about its role in investor portfolios during times of crisis ^[1][3].

The Facts

According to Coinbase's Charting Crypto Q1 2026 report, which surveyed 75 institutional investors and 73 independent investors between early December and early January, an overwhelming 71% of institutions view Bitcoin as undervalued at its current price range ^[1]. Only 4% of institutional respondents considered BTC overvalued, with the remaining 25% viewing it as fairly valued ^[1]. Currently trading around $87,600, Bitcoin has lost over 30% from its October peak, with prices trending sideways and downward since a major market crash on October 10 that liquidated more than $19 billion in leveraged positions ^[1].

Despite their conviction about undervaluation, institutional behavior demonstrates long-term commitment. The survey found that 80% of institutional investors would either hold their positions or buy more if the crypto market fell an additional 10% ^[1]. More than 60% reported they have either maintained or increased their crypto holdings since Bitcoin's October high ^[1]. Furthermore, 54% of institutions view the current market cycle as either in an accumulation phase or a bear market—suggesting they see opportunity rather than danger ^[1].

Meanwhile, prominent investment firm ARK Invest has been aggressively increasing its exposure to crypto-linked equities despite sector-wide declines. The firm purchased $9.4 million in Coinbase shares, $9.2 million in Circle Internet Group stock, and $3.2 million in Bullish shares in recent trades ^[2]. This comes even as Coinbase became the largest drag on several ARK ETFs during late 2025, with the exchange's shares falling more sharply than Bitcoin itself as spot trading volumes declined 9% quarter-on-quarter ^[2]. ARK maintains its bullish long-term outlook, projecting the digital asset market could reach $28 trillion by 2030, with Bitcoin potentially hitting $950,000 to $1 million ^[2].

The immediate market pressure stems from multiple macroeconomic and geopolitical factors. The probability of a US government shutdown spiked to 80% on prediction markets after Democrats threatened to block funding for the Department of Homeland Security ^[3][4]. President Trump's threats to impose 100% tariffs on Canada and the deployment of US warships to the Middle East amid Iran tensions have further increased market nervousness ^[3][4]. Within just six and a half hours during the weekend, total crypto market capitalization dropped from $2.97 trillion to $2.87 trillion, with over $600 million in leveraged positions liquidated—predominantly long positions ^[3].

While Bitcoin struggles, precious metals are experiencing parabolic rallies. Gold broke above $5,000 per ounce for the first time, and silver surged past $100—more than doubling in value since October ^[1][3][4]. The S&P 500 has gained a modest 3% during the same period ^[1]. This flight to traditional safe havens represents a classic "risk-off" pattern, with capital flowing out of volatile assets and into established stores of value ^[4].

Adding complexity, tensions in Japanese markets are creating additional stress. Rising yields on Japanese government bonds and yen volatility near the critical 160-per-dollar level have raised concerns about potential coordinated intervention by Japanese and US authorities ^[4]. This environment threatens the unwinding of yen carry trades—a widespread strategy where investors borrow cheaply in yen to invest in higher-yielding assets like Bitcoin—which could force additional selling pressure as positions are closed ^[4].

Analysis & Context

The current market dynamics reveal Bitcoin's ongoing identity crisis in the eyes of short-term traders versus long-term holders. During acute stress periods, Bitcoin consistently demonstrates correlation with risk assets like tech stocks rather than inverse correlation with traditional safe havens. This pattern has repeated across multiple market cycles—during COVID-19's initial crash in March 2020, during the Terra/Luna collapse in 2022, and now amid government shutdown fears and geopolitical tensions.

However, the institutional survey data suggests a more nuanced reality. The 71% of institutions viewing Bitcoin as undervalued aren't dismissing these short-term correlations; rather, they're looking past them to fundamental value drivers. Their willingness to hold or buy during further declines indicates conviction in Bitcoin's long-term thesis—fixed supply, independence from monetary policy manipulation, and global accessibility—even while acknowledging its short-term behavior as a liquidity-sensitive risk asset.

The divergence between gold's performance and Bitcoin's struggle is particularly instructive. Gold's surge to $5,000 reflects its 5,000-year track record as a crisis hedge, deep liquidity, and cultural acceptance across generations of wealth managers. Bitcoin, despite its "digital gold" narrative, lacks this institutional muscle memory. When portfolio managers face redemptions or margin calls, they sell what's most volatile first—and Bitcoin's 30% drawdown versus gold's record highs illustrates which asset gets liquidated versus which gets accumulated during stress.

Yet this short-term pain may be creating the accumulation opportunity institutions recognize. Coinbase's expectation of two Federal Reserve rate cuts in 2026, combined with consumer inflation holding at 2.7% and GDP growth exceeding 5%, suggests the economic backdrop remains supportive for risk assets once immediate political uncertainties resolve ^[1]. Historically, Bitcoin's strongest rallies have emerged from periods where it was dismissed as "just another tech stock"—often precisely because those moments shake out leveraged speculators and allow patient capital to accumulate at discounted prices.

The technical picture supports cautious optimism for those with longer time horizons. Bitcoin is testing major support around $87,000, with the Relative Strength Index near 39 indicating oversold conditions ^[2]. Previous tests of this support zone have held, and if the level continues to attract buyers, a move toward $105,000-$110,000 could materialize—representing over 20% upside ^[2]. However, sustained bullish momentum would require breaking above $115,000-$120,000 resistance, no small task given current headwinds ^[2].

Key Takeaways

• Institutional conviction remains strong despite price weakness, with 71% viewing Bitcoin as undervalued and 80% willing to hold or buy on further declines—signaling a disconnect between short-term price action and long-term value assessments.

• Bitcoin is currently behaving as a risk asset rather than a safe haven, selling off alongside equities while gold and silver surge to record highs during periods of geopolitical and political uncertainty.

• Multiple macroeconomic pressures are converging—80% probability of US government shutdown, Trump tariff threats, Middle East tensions, and potential yen carry trade unwinding—all contributing to risk-off sentiment that disproportionately impacts Bitcoin.

• The $87,000 support level represents a critical technical juncture, with oversold RSI conditions suggesting potential for a 20%+ bounce if buyers continue defending this zone, though sustained bullish momentum requires clearing $115,000+ resistance.

• ARK Invest's aggressive buying of crypto-linked equities and projection of Bitcoin reaching $950,000-$1 million by 2030 demonstrates how divergent short-term trading behavior can be from long-term fundamental outlooks, creating potential accumulation opportunities for patient capital.