Bitcoin BTC$83,979.09 has historically forced investors to endure severe crashes in exchange for its massive bull runs, but that dynamic could finally be shifting.
The leading digital asset dropped around 55% from its October 2025 high in its most recent down cycle. While that would count as an immense catastrophe in traditional asset classes, for bitcoin it was relatively moderate compared to historical slumps. In November 2021, for instance, after peaking close to $69,000, bitcoin plummeted below $16,000 a year later as higher interest rates, multiple industry bankruptcies, and the collapse of FTX battered the ecosystem, generating a drawdown exceeding 75%. Prior cycles witnessed drops of 80% or greater.
Earlier recoveries were just as extreme. Bitcoin surged from under $4,000 in early 2019 to near $69,000 in 2021, and later climbed from its 2022 bottom to surpass $100,000 after United States spot bitcoin exchange-traded funds (ETFs) opened up the asset to a vastly larger investor base.
Those volatile expansion and contraction phases historically defined bitcoin, but both directions of price action are moderating—including upward momentum.
Bitwise director and head of research Ryan Rasmussen points to spot ETFs, which debuted in January 2024, as a primary catalyst.
Prior to these ETFs, bitcoin ownership skewed heavily toward retail participants, crypto-native funds, and speculators taking tactical positions, according to Rasmussen. ETFs provided financial planners and other institutional professionals with a familiar vehicle to integrate bitcoin into conventional portfolios.
Such participants generally interact with bitcoin differently.
Rasmussen noted that a professional manager might dedicate roughly 2% of a portfolio to bitcoin, whereas crypto-focused retail holders might have 20%, 30%, or more exposed to the cryptocurrency. Consequently, a market crash feels entirely different based on who holds the asset.
“If it goes down 50%, my portfolio is only down 1%,” Rasmussen remarked during an interview, illustrating how an investor holding a 2% position perceives the downturn.
Portfolio rebalancing also plays a role. An adviser targeting a 2% bitcoin weighting might purchase more following a sharp correction to restore the position to its original target. Conversely, if bitcoin rallies aggressively and swells to represent 5% of the portfolio, that same investor may trim holdings during the next rebalancing.
Such mechanisms could cushion sell-offs while simultaneously capping the magnitude of bull runs.
Mark Connors, chief investment officer at Risk Dimensions, anticipates that rising institutional involvement will foster smaller drawdowns than the 70% to 80% losses witnessed in past cycles.
However, investors should not expect something for nothing. Connors stated that while bitcoin’s overall volatility has declined over time, its potential returns have similarly cooled. Increased institutional participation could lead to “smaller blow-off tops due to rebalancing,” he explained.
Put differently, the exact Wall Street dynamics that prevent investors from frantically heading for the exits can also generate selling pressure when prices skyrocket.
Jim Ferraioli, head of crypto research at Schwab, believes there is an even more straightforward driver behind bitcoin’s shrinking fluctuations.
“I don’t know if I would necessarily agree with that take,” Ferraioli commented regarding the theory that ETFs and institutions are steering the transformation.
Despite Wall Street’s expanding footprint, bitcoin remains fundamentally a retail-driven asset, he argued. ETF ownership itself should not be automatically equated with institutional custody, given that retail individuals can purchase these funds as well.
Instead, Ferraioli highlights bitcoin’s sheer scale. Bitcoin has returned to a market capitalization near $2 trillion, meaning the asset requires considerably more capital to double in price than it did when its valuation sat at a few billion dollars. Generating the astronomical multiples of its nascent years becomes increasingly difficult as the underlying base expands.
Furthermore, Ferraioli observes indicators suggesting crypto-native investors, rather than ETF purchasers, provided crucial market support during the latest downturn. The average cost basis for ETF participants hovered around $83,000 for much of the year, he noted, while a metric following active spot investors shifted from roughly $78,000 down toward the mid-$70,000s as those participants accumulated tokens at lower prices.
Bitcoin’s supply dynamics introduce another layer of complexity. Out of approximately 20 million circulating bitcoins, Ferraioli estimates that four million to five million may be permanently lost, while another six million to seven million remain liquid, with the remainder rarely changing hands.
This leaves the ecosystem backed by a massive cohort of veterans who have already survived multiple market crashes and show little inclination to sell during subsequent drops.
There are also indications that Wall Street’s engagement with bitcoin is evolving. Rasmussen mentioned that professional investor interaction with Bitwise remained robust throughout the recent bear market, contrasting sharply with the 2022 downturn when interest “fell off a cliff.”
Overall adoption continues to advance gradually. Rasmussen shared that Bitwise typically conducts around eight consultations with a financial adviser before an allocation is finalized, a procedure that can span nearly two years.
This indicates that the transformation of bitcoin’s investor profile remains an ongoing process. Even so, Ferraioli expects the overarching trajectory to persist, projecting that as bitcoin matures, it will exhibit shallower bear markets alongside less explosive bull markets.
Originally published at https://www.coindesk.com/markets/2026/09/24/bitcoin-s-bear-markets-are-getting-milder-the-bull-markets-may-be-next.
