TLDR
- Bitwise describes the current Bitcoin decline as its mildest structural bear market on record.
- Bitcoin has fallen about 50%, compared with declines of 78% in 2022 and 84% in 2018.
- Established institutional holders are rebalancing and accumulating, while other firms await clearer regulations.
- AI investments, persistent inflation, geopolitical tensions, and interest-rate expectations continue to pressure crypto demand.
- Bitwise says the Clarity Act could unlock greater institutional participation, although passage before August appears unlikely.
Bitwise says Bitcoin has developed a stronger market floor despite competition from artificial intelligence and delayed United States legislation. The asset manager links the change to deeper institutional participation and a smaller drawdown than previous market cycles. However, Bitcoin still faces economic pressure, uncertain interest rates, and further possible losses before the downturn ends.
Bitcoin Drawdown Signals a Stronger Market Floor
Bitwise Senior Investment Strategist Juan Leon described the current decline as the asset’s “mildest structural bear market” on record. Bitcoin has fallen about 50% from its peak, compared with a 78% decline during the 2022 downturn. The cryptocurrency also dropped 84% during the bear market recorded in 2018.
Leon said professional asset managers now hold a greater share of the market, which supports prices during periods of weakness. Some institutional clients are using the decline to rebalance portfolios and make purchases through dollar-cost averaging. Meanwhile, other institutions remain outside the market as they wait for clearer federal rules.
“In 2022, clients asked whether crypto would survive,” Leon said while describing the change in institutional discussions. He said clients now ask about entry points and position sizes instead of questioning the sector’s survival. According to Leon, this shift shows how Bitcoin has gained acceptance among professional allocators since the previous downturn.
Market Indicators Point Toward Possible Capitulation
The current bear market has lasted about eight months, while earlier downturns continued for roughly 12 to 13 months. Therefore, Leon acknowledged that prices could decline further before the market establishes a lasting bottom. However, several traditional indicators now suggest that selling pressure may be approaching a later stage.
Momentum readings have reached oversold levels, and approximately half of all Bitcoin holders currently face unrealized losses. Long-term holders have also resumed accumulation after reducing activity during earlier stages of the market decline. In addition, spot exchange-traded funds recorded their largest monthly outflows during June.
Leon identified those ETF withdrawals as another possible sign of capitulation among market participants. Yet he said broader economic conditions remain a greater problem than weaknesses within the cryptocurrency industry. Persistent inflation, geopolitical tensions, and changing rate expectations continue to limit demand for risk assets.
AI Demand and Legislation Shape Institutional Flows
Artificial intelligence spending has redirected capital toward technology infrastructure, including memory chips and computing facilities. Since April, memory-chip ETFs have attracted about $12 billion, while spot Bitcoin ETFs lost more than $4 billion. Leon said strong demand for computing capacity supports the spending, although it has reduced available capital for crypto assets.
He also said artificial intelligence and digital assets could become complementary technologies instead of permanent market competitors. Autonomous software may require programmable money, machine payments, and stablecoin networks to complete transactions without direct human involvement. Meanwhile, some Bitcoin mining companies have expanded into artificial intelligence and high-performance computing services.
Upcoming inflation reports and Federal Reserve meetings could influence market conditions, while the Clarity Act may affect institutional participation. Leon does not expect Congress to approve the legislation before its August recess, delaying clearer rules for major financial firms. Bitwise maintains that Bitcoin fundamentals continue strengthening as institutional infrastructure, tokenized assets, and traditional finance adoption expand.
