Bitcoin's Cycle Is Changing: Bear Markets Are No Longer as Deep, but Bull Markets Have Lost Their Explosive Kick

Bitcoin is once again showing signs of a structural shift in its market cycle. In the latest drawdown from its October 2025 peak, the cryptocurrency corrected by only about 55%—a relatively mild figure compared with its own dark history. For comparison, after touching nearly US$69,000 in November 2021, Bitcoin plunged below US$16,000 a year later, a drop of more than 75% driven by interest rate hikes, a wave of crypto bankruptcies, and the collapse of FTX. Earlier cycles even recorded declines of up to 80%.

Interestingly, past recoveries were no less extreme. Bitcoin once surged from below US$4,000 in early 2019 to nearly US$69,000 in 2021, then jumped from its 2022 low to more than US$100,000 after the launch of spot ETFs in the United States. But now, both sides of the cycle—the decline and the rally—appear to be losing their drama.

Bitwise director and head of research Ryan Rasmussen sees the arrival of spot ETFs since January 2024 as one of the main triggers. Before ETFs existed, Bitcoin ownership was dominated by retail investors, native crypto funds, and tactical traders. ETFs opened the door for financial advisers and professional investors to put Bitcoin into traditional portfolios in a more familiar way. This difference in owner profile is what has changed the landscape.

Rasmussen gives an example: professional investors typically allocate about 2% of a portfolio to Bitcoin, while crypto-focused retail investors may put in 20% to 30% or more. "If the price drops 50%, my portfolio only drops 1%," he said, describing the perspective of an investor with a small allocation. On top of that, there is a rebalancing mechanism: an adviser with a 2% target allocation will buy when prices fall and sell some when the Bitcoin share rises to 5%. This pattern dampens declines, but it also caps rallies.

Mark Connors, chief investment officer at Risk Dimensions, expects growing institutional participation to make drawdowns smaller than the usual 70-80%. But he warns there is no free lunch. Bitcoin's volatility is indeed declining, but its returns are moderating too. "Smaller blow-off tops due to rebalancing" is the consequence that must be accepted, he said. In other words, Wall Street behavior that keeps investors from panicking out can actually create selling pressure when prices soar.

Jim Ferraioli, director of digital asset research at Schwab, offers a simpler explanation. He does not entirely agree that ETFs and institutions are the main cause. In his view, Bitcoin is still dominated by retail investors, and ETF ownership does not automatically reflect institutions because individuals can buy them too. The main factor, Ferraioli says, is the size of the Bitcoin market, which is now back at around US$2 trillion. To double the price requires a far larger injection of funds than when Bitcoin was worth only a few billion dollars. The spectacular multiples of the early era are increasingly hard to repeat as the base grows.

Ferraioli also sees signs that native crypto investors, not ETF buyers, are the ones supporting the market during drawdowns. The average cost basis for ETF investors has been around US$83,000 through the year, while a measure tracking active spot investors moved from about US$78,000 to the mid-US$70,000s as they accumulated at lower prices. On the supply side, out of roughly 20 million Bitcoin in circulation, Ferraioli estimates 4-5 million are lost and 6-7 million are liquid. The rest rarely changes hands. This leaves a base of large holders who have weathered multiple crashes and are reluctant to sell under pressure.

"Professional investor engagement with Bitwise remained high during the latest drawdown, unlike the 2022 bear market when interest fell off a cliff." — Ryan Rasmussen, Bitwise

Even so, adoption is still slow. Rasmussen reveals that Bitwise typically holds about eight meetings with financial advisers before an allocation is made, a process that can take nearly two years. This shows that the shift in Bitcoin's investor base is far from complete. But Ferraioli is optimistic the direction of travel will continue: as Bitcoin matures, bear markets will become shallower and bull markets will no longer be explosive.

For Indonesian investors, this dynamic offers a double-edged implication. On one hand, the risk of extreme drawdowns that has long been a specter may begin to ease, opening opportunities for domestic institutional investors and pension funds to consider limited exposure. On the other hand, the potential for big gains in a short time is also shrinking, so aggressive momentum-based trading strategies need to be reevaluated. The Financial Services Authority (OJK) and Bappebti, which regulate crypto assets in Indonesia, need to watch this trend closely, especially in drafting a regulatory framework that protects retail investors from unrealistic return expectations.

Going forward, the question is no longer whether Bitcoin will remain volatile, but how large a role institutions will play in shaping its cycle. If this maturation trend continues, Indonesia's crypto market may need to prepare for a new era: more stable, but also more boring for those chasing quick profits.