Bitcoin’s latest drawdown may look substantial in conventional financial markets, but by the standards of its previous cycles, the decline has been relatively mild.
The cryptocurrency reached a record above $126,000 on Oct. 6, 2025. One year later, bitcoin was trading at $85,453, representing a 32% decline from its all-time high.
That compares with much steeper losses during previous cycles. Bitcoin had fallen 69.7% from its 2013 peak after one year, while the cryptocurrency was down 82.3% a year after the December 2017 top. Following the November 2021 peak, bitcoin had declined 74.6% over the next 12 months, according to CoinDesk calculations.
The current cycle also stands out when measured from peak to trough. Bitcoin slipped below $59,000 on June 30, putting its maximum decline at more than 53%. In earlier bear markets, bitcoin suffered peak-to-trough losses of between 77% and 85%.
The timing has changed as well. Previous cycles generally took about a year or longer to reach their deepest lows. This time, bitcoin reached its trough after roughly nine months before recovering relatively quickly.
“The most notable changes are the significantly shortened duration of the drawdown and the reduced time spent at the bottom,” Tim Sun, senior researcher at HashKey Group, told CoinDesk.
Institutional Capital Has Changed Bitcoin’s Market Structure
The investors driving bitcoin’s rallies have changed considerably, helping explain the more moderate decline.
Earlier bull markets were dominated more heavily by retail traders and leveraged positions. When those rallies broke down, forced liquidations frequently intensified the declines and contributed to failures among crypto funds and exchanges, as seen in 2022.
The 2023–25 rally had a stronger institutional component. Investors gained exposure through regulated products such as ETFs, alongside participation from major asset managers, family offices and corporations.
The following downturn consequently looked different. Rather than being driven mainly by a collapse in retail leverage, it was largely associated with changes in macroeconomic conditions and institutional capital flows.
“While previous cycles were driven primarily by retail investors and leverage, buyers in this current cycle increasingly stem from outside the crypto market, including ETFs, asset management giants, family offices, and even corporations,” Sun said.
He described the broader movement of traditional capital into crypto as a key factor behind the market’s changing behavior.
Sun said the recent decline was not primarily the result of “black swan” shocks. Instead, investors reduced exposure as the external macroeconomic environment and asset-allocation landscape changed.
“Consequently, despite undergoing significant adjustments, the market did not trigger the persistent negative feedback loops seen in the past,” he said.
Griffin Ardern, co-founder and volatility desk portfolio manager at Primal Fund, said ETF-driven capital is structurally different from speculative retail flows.
“ETF allocation money rebalances to target weights — it buys weakness by construction,” Ardern said.
He added that leverage was largely removed at the top and did not return in a meaningful way.
“Hence nine months to grind out a 53% decline, rather than a few months of cascading liquidations taking it down 80%,” he said.
The market did experience a major deleveraging event on Oct. 10 last year. A macro-led sell-off caused more than $19 billion of crypto derivatives liquidations. Temporary pricing dislocations on Binance involving USDe, wBETH and BNSOL added to the turmoil. Auto-deleveraging systems on several exchanges also closed profitable positions to absorb losses.
A More Mature Bitcoin Market Means Smaller Moves
The reduced severity of the latest decline may be connected to bitcoin’s declining volatility.
“As bitcoin evolves and more participants come to market, the realized volatility of the asset will decrease. This means shallower drawdowns and lower peaks and is likely a contributing factor to the more muted sell-off we saw in the last cycle,” said Jeff Anderson, head of U.S. at market-making firm STS Digital.
Bitcoin’s volatility has trended lower since U.S. spot ETFs launched in early 2024, helping move the asset further away from its former “Wild West” image.
Sun said annualized bitcoin volatility is now around 40%, compared with historical levels above 80%.
The options market is also showing less expected volatility. Ardern said bitcoin’s DVOL index, which tracks annualized implied volatility, has been holding around 35 points.
“The shape going forward is probably a staircase — grind up, air pocket, fast repair — rather than a parabola,” he said.
Even so, Sun believes bitcoin remains capable of sudden and outsized rallies because of its supply dynamics.
Only 21 million bitcoin can ever exist, and long-term holders control a significant portion of the supply. A surge in ETF inflows, a rapid improvement in macro liquidity or concentrated short covering could therefore create a situation in which available supply cannot keep pace with new demand.
In those circumstances, “marginal demand can still exert a powerful upward push on prices, potentially triggering non-linear surges.”
Low Volatility Does Not Mean Low Risk
Ardern’s main concern is not the size of bitcoin’s recent decline but the way traders are positioned.
Implied volatility is near its lowest percentile on record, while one-year options skew remains neutral to bearish.
“The derivatives market has bought ‘shallow’, but nobody is willing to pay for ‘upside exposure’ yet,” he said.
Options skew reflects the difference between the prices of bullish call options and bearish puts. A neutral reading suggests traders are not aggressively positioning for a major upside move.
Ardern also warned that the strongest version of the shallow-drawdown narrative may emerge precisely when investors can obtain downside protection cheaply.
He argues that the next major bitcoin decline could depend more on the long-term Treasury market than on BTC’s technical setup.
“If the 30-year [yield] defence keeps failing, this cycle may not stay shallow either,” he said.
The 30-year Treasury yield recently reached 5.7%, its highest level since April 2002, and has climbed more than 80 basis points this year. Higher yields increase the opportunity cost of holding non-yielding assets such as bitcoin and gold.
In August, the Treasury announced an expanded bond buyback program intended to help curb rising yields. Bitcoin reacted strongly, moving from approximately $64,000 to nearly $80,000 within days.
Yields, however, have continued to rise. Some analysts attribute that increase to fiscal concerns rather than stronger economic growth. That interpretation could potentially favor assets such as gold and bitcoin.
Ardern compared the current market setup with the Nasdaq between 1994 and 1999, a period when “policy slows down, the cycle stretches, every interim correction is shallow.”
But he cautioned investors against assuming that such stability can continue indefinitely.
“Just remember how that story ended,” he said.
The Nasdaq peaked in March 2000 and then dropped nearly 78% during roughly the following two years.
