Bitcoin’s sharp correction during a flat year

Bitcoin has suffered its fastest and steepest correction in three years, with prices plunging 36% from the $126,000 October all-time-high to around $80,000 in just six weeks. Over this period, Bitcoin has shed more than $900 billion in market cap – eclipsed only by the 77% peak-to-trough in the last crypto winter, when $1 trillion was shed over the course of a year. 

It is the third 30%-plus correction since the post FTX-crash bear market lows four years ago. While these percentage declines are shallower compared to past corrections – notably the 56% sell-off between April and June 2021 – Bitcoin’s vastly larger market cap today means each downturn translates into far more precipitous nominal losses of committed capital. But this correction seems different to the prior two 30%-plus corrections – during Q1 2025 and Q3 2024 – for at least two reasons: the four-year cycle alignment and the 10 October crypto liquidation event. 

Four-year cycle vs extended macro cycle

The current price breakdown coincides with the traditional four-year cycle where Bitcoin enters a new bear market in the fourth quarter in the post-halving year. Market structure has changed enormously with institutional adoption, ETF flows, treasury companies and political support, all diminishing the economic relevance of the halving cycle. But the geometric symmetry of Bitcoin price action relative to prior cycle timelines remains extraordinarily well aligned. 

Both previous bull market highs in 2017 and 2021 arrived precisely 1,064 days (expressed as 152 weeks in the chart below) after the preceding cycle low. If history repeats itself in 2025, and the Bitcoin price peaked on 6 October at $126,198, this marks 1,064 days since the cycle low. In each preceding crypto winter, price has taken one year to find a bottom, implying Bitcoin will bottom in October 2026.

This clockwork geometry invites debate over price drivers. Is the Bitcoin price still a function of a self-reinforcing four-year halving cycle and technical symmetry; or has the original cryptocurrency evolved to become a macro-monetary asset that is driven by global liquidity, institutional capital flows and broader financial conditions? Perspectives on this issue largely divide market participants over whether the cycle top is in, or whether Bitcoin has entered a mid-cycle re-accumulation period.

Four-year cycle purists highlight the recent breach of key technical levels – notably, the ‘death cross’ formed by the 50-day moving average crossing below the 200-day moving average, echoing prior cycle tops in 2017 and 2021. Although Bitcoin has yet to confirm a macro lower low, price has now closed beneath the 50-week moving average for successive weeks. Historical four-year cycle norms imply this increases the probability of an eventual deeper drawdown toward the 200-week average over the coming months, which currently sits at $55,600. Glassnode data indicates significant long-term holder distribution near recent highs, while around 2.8 million Bitcoins held by short-term holders remain underwater, signalling divergence between investor cohorts. This contrasts with stable inflows into US spot Bitcoin ETFs, which maintain assets under management near all-time highs.

By contrast, proponents of the extended macro-cycle view argue that these price reactions reflect ingrained psychological reflexivity – sharp 70-80% drawdowns starting in Q4 of post-halving years have ingrained muscle memory, reinforcing a self-fulfilling expectation. In this view, the halving is a secondary narrative, subordinate to macro liquidity regimes, cross-asset class relative value assessments and behaviour of large financial actors. The absence of a classic blow-off top or altcoin frenzy supports interpreting the current correction as mid-cycle digestion rather than cycle exhaustion. Finally, Bitcoin’s broadened long-term institutional ownership, with multi-cycle horizons, will blunt historic deep drawdowns. Whichever perspective proves more accurate, institutional Bitcoin adoption has broadened ownership among long-term investors who may shield the original cryptocurrency from historic drawdowns of the past, as the wisdom of the crowd suggests.

Largest crypto liquidation in history

On 10 October, $19 billion in leveraged crypto positions were liquidated in 24 hours. It marked the largest-ever single-day liquidation in crypto history, with Bitcoin’s price plunging between 10% and 18% across exchanges in a single day – from $109,700 on Bitstamp to $100,000 on Kraken. Price dispersion was due to excessive leverage, cross-collateralised margin calls and liquidity weaknesses.

The crypto liquidation cascade – which peaked in an abrupt $821 billion sell-off across the total crypto markets – was triggered by US President Donald Trump’s surprise announcement of a 100% tariff on all Chinese imports and new export controls on AI chips, sparking fears of a US-China trade war and panic selling. The S&P 500 slumped 3.8% over two days and the VIX volatility index spiked to 29, indicating elevated market fear.

Ethereum fell 21.7% to $3,437, Solana slumped 28.7% to $160 and XRP plunged 44.2% to $1.56. Ethena’s USDe algorithmic stablecoin deviated from its 1:1 dollar peg largely on Binance due to a flawed price oracle undervaluing USDe compared to its on-chain value. This mispricing caused automated selloffs on Binance, amplified by high leverage and insufficient liquidity buffers, which briefly artificially depressed altcoin prices – including a 71% XRP plunge to $0.78 in less than 45 minutes before recovery. False insolvency rumours spread regarding a major crypto exchange.

Since 10 October, crypto markets have recovered modestly, after a 26.5% drawdown to $80,000 by 21 November – exactly three years after the 2022 bottom of $15,481. Price action and macro conditions leave investors debating whether the top is in or if the four-year halving cycle will yield to an extended business cycle. Traders anticipate a near-term retest of around $100,000.

The bigger picture

In under three years, Bitcoin surged seven-fold to above $126,000 per token without triggering a euphoric sentiment peak. During 2025, price has oscillated within a wide $90,000 to $120,000 range, marking a prolonged sideways consolidation and potential distribution which has gradually eroded bullish sentiment. Expectations for sovereign Bitcoin reserves, steady ETF inflows and regulatory breakthroughs have yet to elevate crypto markets to anticipated heights.

For an asset historically defined by explosive continuation, persistent price stagnation bred expectation fatigue and narrative exhaustion across the broader crypto ecosystem that lowered tolerance for subsequent downside volatility. Bitcoin's performance in 2025 also jars with gold’s meteoric ascent and the AI frenzy overshadowing everything else. Meanwhile, a wave of Bitcoin miners pivoted from pure mining to AI-focused energy and digital infrastructure, attracted by higher profitability from AI hyperscaler demand versus volatile mining returns. Bitfarms announced plans to wind down mining over two years, repurposing its Washington facility for high-performance computing (HPC) and AI workloads. IREN paused mining expansion, reinvesting revenues in AI data centres, supported by a $9.7 billion GPU cloud contract with Microsoft. Marathon Digital and Riot Platforms are pivoting idle mining capacity to AI, while Cipher and Terawulf secured backing from SoftBank and Google to build data centres. In this context, AI has been more of a capital competitor than aligned catalyst. AI’s influence on risk appetite is also a potential future drag. As the scale of global AI capex continues to outpace real-economy productivity gains, it creates the potential for a near-term investment bubble. This could soften broader risk sentiment if the gap between capex investment, with realised revenue and productivity gains fails to narrow.

Ultimately, crypto enthusiasm has waned in 2025. The muted launch of altcoin ETFs contrasts with the hype leading up to the spot Bitcoin ETFs in January 2024, which further underscores a creeping sentiment malaise and limited institutional interest beyond Bitcoin. The looming MSCI delisting threat to Strategy, formerly MicroStrategy, suggests potential forced outflows from passive funds, pressuring its stock price and investor appeal. Founder Michael Saylor dismissed the concerns as “alarmist”.

Meanwhile, more than 95% of all Bitcoin is now mined, pushing issuance into an increasingly inelastic phase as coins shift from short-term holders to longer-horizon participants. Bitcoin remains vulnerable to downside, but market structure matures amid price stagnation. Harvard University’s $56.9 billion endowment boosted Bitcoin holdings via BlackRock’s iShares Bitcoin Trust (IBIT), now its largest holding at $442.9 million, representing 21% of US public equities.

There is a paradox emerging. The very characteristics that signal Bitcoin’s maturation – longer consolidation phases, a broader institutional base and reduced volatility – are the same conditions that are preventing explosive price discovery. In this sense, it is stability rather than irrational exuberance that is crypto’s new source of unease.