Bitcoin has been hit hard, and the drop has caught a lot of people off guard. In just one day, Bitcoin fell about 14%, and over the past week, it’s down roughly 25%. According to Matt Hougan from Bitwise, this downturn could last for several months before the market finally finds a bottom.
Even though prices have bounced a little, Bitcoin is still trading close to 50% below its all-time high. That’s left many investors asking the same questions: why did this happen, can it fall even more, and when does it finally stop?
Hougan says there isn’t just one reason behind the crash. Instead, several things came together at the same time.
One big factor is the four-year crypto cycle. Long-term investors know that big bull runs are usually followed by deep pullbacks. To get ahead of that, many started selling early. Hougan estimates that more than $100 billion worth of Bitcoin was sold last year alone as investors tried to avoid getting caught in another brutal cycle downturn.
Another issue is competition from other markets. Crypto isn’t the only exciting place anymore. AI stocks and precious metals like gold and silver are grabbing attention. Investors who chase trends are moving their money elsewhere, and that has taken some demand away from crypto.
Then there was a massive leverage wipeout on October 10. After an unexpected announcement by former President Donald Trump, the market saw the largest leveraged liquidation event in crypto history. With low liquidity and high panic, prices dropped fast as positions were forced to close.
There’s also been unease around U.S. monetary policy. Trump’s nomination of Kevin Warsh for Federal Reserve Chair worried investors who see him as tough on interest rates. That fear spread across markets, including crypto.
On top of that, concerns about quantum computing are starting to weigh on sentiment. Some investors worry that future quantum tech could threaten Bitcoin’s security. Even though this is likely a long-term issue, the lack of clear action has made some people nervous enough to step aside.
Finally, the broader market mood has turned defensive. Investors are pulling back from risky assets in general. Bitcoin isn’t alone here. Tech stocks, gold, and silver have all seen sharp moves as global markets shift into a risk-off mode.
So far, Bitcoin is down about 54% from its peak. That sounds bad, but Hougan points out that past bear markets were even worse. Bitcoin fell 86% in 2014, 84% in 2018, and 77% in 2022. Based on history, this means prices could still fall further.
Bear markets in crypto usually last around 12 to 13 months. That suggests this downturn may not be finished yet. While crypto has matured a lot since earlier cycles, Hougan says a deeper drop is still possible, even if a collapse as severe as past ones is less likely.
Still, there are reasons for optimism. Many investors remember how painful 2018 and 2022 felt at the time. Those who bought during those lows saw massive gains later, with returns of around 2,000% after 2018 and about 300% after 2022.
The fundamentals haven’t disappeared. Demand for digital assets is still growing. Regulation is becoming clearer, not harsher. New ideas like tokenization, stablecoins, and blockchain-based financial tools continue to move forward.
No one knows exactly when the bottom will hit. Often, it comes slowly, as sellers run out of energy and fear fades. Certain events could help speed up a recovery, like positive regulation such as the Clarity Act, renewed interest in AI-related crypto projects, or a broader return to risk-taking in global markets.
For now, Hougan’s advice is simple: be patient. Crypto is volatile, and the short term could stay rough. But history shows that long bear markets are often followed by powerful rallies.
For investors who can handle the ups and downs and think long term, this period may not be the end of crypto’s story, but just another difficult chapter before the next big move.
