Has Bitcoin Bottomed? The Market Is Asking the Wrong Question
- James McKay
- 1 day ago
- 7 min read
Updated: 4 hours ago
The evidence at a glance
Current drawdown remains within historical norms.
Real rates and internal liquidity explain much of the sell-off.
Technical and on-chain indicators are beginning to converge.
The exact bottom is unknowable but history suggests we've hit the zone where risk-reward improves.
Every Bitcoin bear market feels different while it's unfolding. This time, the headlines have centred on record ETF outflows, a hawkish shift in Federal Reserve expectations, rising real interest rates, and a dramatic rotation of capital into artificial intelligence. These headwinds have collectively pushed Bitcoin over 50% below its all-time high, leaving investors to question whether the correction has further to run. Â
Historical data suggests this may be the wrong question to ask. Major market bottoms are almost impossible to identify in real time, with investors rarely receiving a clear signal that the low is in. Instead, market reversals tend to emerge gradually as technical, on-chain, sentiment, and macroeconomic indicators begin pointing in the same direction, even while the news flow remains overwhelmingly negative.
That doesn't mean Bitcoin cannot fall further; another leg lower remains entirely possible if macroeconomic and/or liquidity conditions deteriorate. The objective shouldn't be about picking bottom but to assess whether the market is beginning to exhibit the characteristics that have accompanied the final stages of major corrections.
Understanding the Correction
Bitcoin's current bear market has not emerged in a vacuum and the forces driving the correction have been relatively well understood for several months. The first point to mention here is that, yes, calls to declare the Bitcoin four-year cycle "dead" have proven premature. Institutional adoption and macroeconomic shifts have undeniably introduced new complexities, but the current market correction remains remarkably consistent with historical precedents. This consistency holds true irrespective of whether these four-year cycles are being chiefly driven by Bitcoin's halving or the broader global liquidity/business cycle.
Figure 1: Bitcoin's Four-Year Cycles
As seen in Figure 1, the drawdown from the October 2025 peak has mirrored the timing and structural behavior of previous bear markets, suggesting that rather than being obsolete, the cycle has simply matured. So the current phase isn't a deviation from the established rhythm, but a continuation of the same fundamental boom-and-bust dynamics that have defined Bitcoin’s trajectory for over a decade.
Perhaps the most important factor from a macro perspective has been the sharp rise in US real interest rates. As Figure 2 illustrates, previous spikes in two-year real yields have consistently coincided with periods of sustained weakness in Bitcoin. Following the easing of geopolitical tensions in the Middle East and a moderation in inflation expectations, bond yields have remained elevated while inflation expectations have drifted lower, creating another challenging backdrop for scarce monetary assets.
Figure 2: US Two-Year Real Interest Rates vs. Bitcoin Bear Markets
The relationship extends beyond digital assets. Bitcoin has fallen approximately 45.5% over the past year, while gold, despite gaining more than 21% over the same period, has also entered a meaningful correction from its recent highs. Although the relationship between the two assets remains consistently inconsistent, simultaneous weakness suggests investors have been reducing exposure across the broader hard-asset complex rather than Bitcoin alone.
Crucially, this asset correction is occurring even as global macro liquidity expands and the likelihood of a dovish shift in central bank policy increases. Yet, mirroring a distinct divergence from this broader monetary backdrop, the digital asset ecosystem has experienced its own sharp tightening of internal market liquidity. Spot Bitcoin ETFs experienced $4.08 billion of net outflows during the second quarter, according to Coin Metrics, with $3.84 billion occurring during June alone. At the same time, the stablecoin market capitalisation also contracted by approximately $4.2 billion, while Bitcoin futures open interest fell from $49.2 billion to $33.5 billion as leveraged positions were unwound.
Figure 3: Spot Bitcoin US-based ETF Flows, Q2 2026
These structural developments point to a market that has already undergone a significant deleveraging process rather than a renewed surge of speculative excess. Investor behaviour reinforces this conclusion. Although sentiment has recovered modestly from its recent lows, the Crypto Fear & Greed Index spent much of the correction in "Extreme Fear" territory, highlighting the degree of pessimism that has accompanied the sell-off.
Yet neither sentiment nor capital flows can tell us whether the correction is nearing its end. To answer that question, we need to examine how the current drawdown compares with previous market cycles.
Why This Correction Looks Different Than It Feels
Large bear market price declines rarely feel like buying opportunities at the time and are often accompanied by headlines declaring that the cycle is over, that institutional adoption has failed, or that some new structural force has permanently altered Bitcoin's trajectory. Narrative tends to follow price, and this cycle has been no different.
Bitcoin is currently trading approximately 50% below its October-2025 all-time high of around $126,198 and despite the pain, this remains relatively modest by historical standards. Previous bear markets have routinely produced draw downs in excess of 70-80%, with the 2011, 2014 and 2018 cycles all exceeding 80%Â before ultimately establishing long-term bottoms (Figure 4).
Figure 4: Bitcoin % Drawdowns from All-Time High
Within this context, the more unusual feature of the current cycle is not the size of the drawdown, but its relative resilience. A decline of around 50% remains severe by conventional asset class standards, but sits comfortably within the historical range of cyclical corrections for Bitcoin.
This perspective also helps explain why experienced Bitcoin investors often pay less attention to price alone and instead focus on where price sits relative to longer-term valuation and network metrics. In isolation, the current correction tells us very little about whether Bitcoin has reached its ultimate low, as major market bottoms have historically been characterised not simply by large drawdowns, but by the convergence of multiple independent indicators pointing towards exhaustion in selling pressure.
"The question isn't whether Bitcoin has already bottomed. The question is whether the market is beginning to exhibit the characteristics that have historically accompanied major bottoms."
The Anatomy of a Market Bottom
Although the analysis of on-chain data and technical charts has matured into a virtual cottage industry, no single indicator has ever successfully pinpointed a Bitcoin market bottom. As mentioned above, cyclical turning points typically require a confluence of several independent metrics aligning around the same narrative. That macro convergence is precisely where the market appears to sit today.
From a technical perspective, Bitcoin is once again trading near its 200-week moving average (200WMA), a level that has repeatedly acted as support during previous bear markets. At the same time, the Relative Strength Index (RSI)Â has begun exhibiting bullish divergence on the daily time frame since June, with momentum improving even as price remains under pressure (Figure 5). Neither indicator guarantees that the correction is complete, but together they suggest that downside momentum may be fading.
Figure 5: Bitcoin Price vs. 200-Week Moving Average and Relative Strength Index (daily)
The onchain data paints a similar picture. For example, the MVRV Z-Score is an important valuation metric that compares Bitcoin's market capitalisation with the aggregate cost basis of all coins in circulation. In previous cycles, readings below 0.5 have historically coincided with periods where Bitcoin has traded close to fair value. At 0.22, the indicator is once again approaching the levels that have marked previous bear market lows.
Figure 6: Bitcoin's MVRV Z-Score, 2012–2026
Closely related is Bitcoin's realised price, which represents the average acquisition cost of every coin currently in circulation. During previous cycles, Bitcoin has repeatedly found support near this level as the market approached the average cost basis of long-term holders. Once again, price is converging towards this historically significant valuation threshold.
Figure 7: Bitcoin Realized Price
Perhaps the most intuitive indicator, however, is the percentage of Bitcoin supply currently sitting in profit versus loss. During euphoric bull markets, almost all circulating supply is held at a profit. The opposite occurs during deep bear markets, where an increasing share of investors finds themselves underwater. Importantly, historical cycle bottoms have not typically occurred before the proportion of coins held at a loss overtakes those in profit, but shortly afterwards, as capitulation gives way to renewed accumulation. The latest data suggests Bitcoin is now approaching this transition zone once again (Figure 8).
Figure 8: Bitcoin – Supply in Profit / Loss
Collectively, this data suggests the market is beginning to exhibit many of the technical, on-chain and behavioural characteristics that have consistently accompanied the latter stages of major corrections. Whether the final bottom has already formed or still lies modestly ahead, history suggests that periods like these have often proved more important than they first appeared.
So, has Bitcoin bottomed?
Attempting to pinpoint the absolute dollar bottom of a Bitcoin correction is a fundamentally flawed objective. The only certainties in this scenario is that a final capitulatory leg lower remains possible and that we are seeing a confluence of technical and on-chain indicators that are gradually aligning in the same direction while broader sentiment remains overwhelmingly negative.
What is clear is that the market has entered the cyclical phase where balance between risk and long-term opportunity has shifted heavily in favor of allocators. We believe it to be unlikely that the current bear market will persist until year's end, particularly if the hawkish narrative around the US Fed fades and rate cuts are announced in the months ahead. The exact bottom will ultimately only be obvious in retrospect and navigating the underlying conditions that define it is the only variable investors can control.
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Disclaimer: The information contained within is for educational and informational purposes ONLY. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision. No commercial relationships or partnerships exist with any of the technology providers, manufacturers, or suppliers herein.
