Why Is Bitcoin Dropping? The Bear Market Case Explained

TL;DR

Bitcoin is dropping because its cycle is over and it has transitioned into a bear market, having topped in the fourth quarter of the post-halving year exactly as it did in prior cycles. Unlike the euphoric peaks of the past, this top happened on apathy, producing a slower, choppier decline that closely mirrors the mid-2019 downturn.

Transcript

Hey everyone and thanks for jumping back into the cryptoverse. Today we're going to talk about Bitcoin and discuss why the price is dropping and why I think it will likely continue to drop. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and also check out into the cryptoverse premium at intothecryp... Read More

Key Insights

• Bitcoin's price is falling primarily because the cycle is over and the market has transitioned from a bull phase into a bear phase after the cycle top. The rally, the lower high, and the deeper drop are described as what Bitcoin always does.
• Every one-year Bitcoin bear market has started in the fourth quarter of the post-halving (post-election) year. The pattern repeats across the historical tops, so the current drop is framed as simply when Bitcoin always drops.
• The length of the most recent cycle fell right between the lengths of the previous two cycles, making it comparable to them. This cycle-length argument is presented as the first reason the price is dropping.
• This cycle topped on apathy rather than euphoria, which is why the decline is slow and gradual. Without retail that FOMOed in at the top, selling comes from time-based capitulation instead of people fleeing steep drawdowns.
• The 2019 top is the key comparison because it is the only time in history Bitcoin topped on apathy rather than euphoria. Like now, that top saw no rotation into altcoins and preceded an expansion of the Fed's balance sheet.
• The absence of an altcoin rally is not a valid reason for the bull market to continue. Altcoins also failed to rally in 2019, so their inactivity is not Bitcoin's fault nor a reason the cycle must extend.
• Global net liquidity, not a lagged version of M2, is the metric to watch, since Bitcoin always tops before M2 tops. Global net liquidity combines central bank balance sheets while subtracting the reverse repo and the TGA.
• A rotation from metals into crypto is unlikely in the short term because when gold drops, Bitcoin tends to fall harder. Waiting in crypto for metals to top does not make sense if a metals decline would hit crypto more severely.

Questions & Answers

Q: Why is Bitcoin dropping right now?

Bitcoin is dropping because its market cycle is over and it has transitioned from a bull market into a bear market after the cycle top. The speaker argues this is simply when Bitcoin always drops, since every one-year bear market has begun in the fourth quarter of the post-halving year. The rally, the lower high, and the deeper decline are described as the typical behavior Bitcoin repeats each cycle.

Q: How does this cycle compare to previous Bitcoin cycles?

The length of the most recent cycle fell right between the lengths of the previous two cycles, making it roughly the same as them. Because the cycle length matched prior cycles and the top landed in the fourth quarter of the post-halving year, the speaker treats the current downturn as a repeat of past bear markets rather than something new or exceptional that would justify an extended bull run.

Q: What does it mean that Bitcoin topped on apathy instead of euphoria?

Topping on apathy means the peak formed without the wave of retail FOMO that defined earlier euphoric tops. As a result, the decline is slower and more gradual, driven by time-based capitulation rather than people fleeing steep drawdowns. The trade-off is that apathy-driven declines tend to be choppier and more uneven, featuring repeated countertrend rallies rather than a single sharp capitulation event.

Q: Why does the speaker compare the current market to 2019?

The speaker compares now to 2019 because it is the only time in history Bitcoin topped on apathy rather than euphoria. Like the current situation, the 2019 top saw no rotation into altcoins and occurred a couple of months before the Fed's balance sheet began to expand. The slow, steady decline of that period is presented as closely matching the current downturn, with only slightly lower highs and lows.

Q: Does the lack of an altcoin rally mean the bull market must continue?

No. The speaker rejects the idea that the bull market has to continue just because altcoins never rallied. If altcoins failed to rally when Bitcoin did, that is not Bitcoin's fault and not a reason the cycle must extend. Altcoins also failed to rally in 2019, so their inactivity is consistent with a top forming rather than evidence that more upside is still owed to the market.

Q: Why can the stock market rise while Bitcoin falls?

In a risk-on environment with excess liquidity, crypto performs very well, but in a risk-on environment without excess liquidity, crypto can drop even as the stock market climbs. The speaker notes that in 2019 stocks kept rising after Bitcoin stalled, mirroring the present. For liquidity to truly return the way people want, stocks would first have to show weakness; until then Bitcoin is likely to keep bleeding against equities.

Q: What metric does the speaker say people should watch instead of M2?

The speaker says people should watch global net liquidity rather than a lagged version of M2, because Bitcoin always tops before M2 tops. Global net liquidity is defined as the combined balance sheets of major central banks, including the Fed, Japan, China, the UK, and the ECB, with the reverse repo and the TGA subtracted out. He argues this measure better explains why crypto is falling while stocks hold up.

Q: Will money rotate from metals into crypto when metals top?

The speaker considers a near-term rotation from metals into crypto unlikely. He observes that when gold drops, Bitcoin often falls much harder, so sitting in crypto while waiting for metals to top does not make sense. If metals decline, crypto is likely to get hit harder rather than benefit, which undercuts the popular idea of a large rotation out of metals and into crypto in the short term.

Summary & Key Takeaways

• Bitcoin is dropping because its cycle has ended and the market has entered a bear phase. The speaker argues the cycle length matched the prior two cycles and that Bitcoin topped in the fourth quarter of the post-halving year, exactly when its historical bear markets have always begun.

• Unlike prior euphoric tops, this cycle peaked on apathy, so the decline is slower, choppier, and marked by countertrend rallies rather than one sharp capitulation. This structure closely resembles mid-2019, the only other time Bitcoin topped on apathy without a rotation into altcoins.

• Macro liquidity, not lagged M2, drives the outlook. The speaker points to global net liquidity and central bank balance sheets, notes stocks can rise while crypto bleeds, and warns that a metals decline would likely hit crypto harder rather than trigger a rotation into it.