Bitcoin Bear Market May Last Until Late 2026, Analyst Predicts $40K Risk

Bitcoin has experienced a sustained bear market since late 2021, with prices falling from nearly $69,000 to below $20,000 by mid-2023. An analyst cited by CryptoPotato projects that this downturn could continue until late 2026, with a potential further decline to around $40,000 before a lasting recovery. Understanding the dynamics behind this prolonged cycle is critical for evaluating the evolving behavior of investors and the interplay of economic factors shaping the crypto market.

What happened

Bitcoin entered a bear market phase in November 2021 after reaching an all-time high near $69,000. Since then, its price has steadily declined, falling below $20,000 by mid-2023, marking one of the longest downturns in its history. An analyst interviewed by CryptoPotato forecasts that this bear market may persist until late 2026, with a downside risk level around $40,000 before a sustained recovery phase begins.

This analysis draws on several key on-chain metrics, including realized price, Market Value to Realized Value (MVRV), and the proportion of supply held by long-term holders. These indicators have historically been used to identify market cycle bottoms and signal transitions from bearish to bullish phases. The analyst interprets the $40,000 level as a critical support zone where capitulation might occur, potentially marking the end of the bear market.

At the same time, broader economic indicators such as Federal Reserve interest rate policies, inflation trends, and episodes of macroeconomic stress—like banking sector crises—have been linked to Bitcoin price movements and investor sentiment. For instance, tightening monetary policy and elevated inflation have been associated with reduced risk appetite among investors, which can extend periods of price weakness in volatile assets like Bitcoin.

Institutional demand, as reflected through filings and disclosures from issuers of Bitcoin-related exchange-traded funds (ETFs) such as ProShares and Grayscale, also provides insight into market sentiment. However, these ETF inflows are generally regarded as lagging indicators that tend to confirm shifts in market cycles rather than predict them.

Why this matters

The projected extension of Bitcoin’s bear market into late 2026 has significant implications for market structure and investor behavior. Prolonged downturns tend to reduce speculative activity and increase accumulation by long-term holders, as evidenced by on-chain supply metrics. This shift can lead to a market dominated by patient investors, potentially stabilizing price volatility but also limiting short-term liquidity.

Understanding the signals that indicate a market bottom is crucial for both institutional and retail participants. On-chain metrics such as the MVRV ratio dropping below 1 have been interpreted as signs of undervaluation and potential turning points. However, these signals are not always timely or precise, underscoring the complexity of relying solely on blockchain data for market timing.

Moreover, macroeconomic conditions play a pivotal role in shaping Bitcoin’s market cycles. The Federal Reserve’s interest rate policy, inflation levels, and broader economic stressors influence investor risk tolerance and opportunity costs for holding volatile assets. These external factors can prolong bear markets by dampening demand and encouraging capital flight to safer assets.

Institutional ETF flows, while important, largely reflect sentiment after a shift in market dynamics has occurred. This suggests that market participants may need to rely on a combination of on-chain data and macroeconomic indicators to form a comprehensive view of Bitcoin’s cycle phases.

What remains unclear

Despite the insights provided, several key questions remain unresolved. The reliability of on-chain metrics in precisely predicting the timing of bear-to-bull transitions is uncertain, given historical variability and the influence of external factors. It is not clear how consistent or predictive these signals are across different market cycles.

The future trajectory of macroeconomic conditions, including the possibility of further Federal Reserve rate hikes or economic recessions, adds additional uncertainty to Bitcoin investor behavior and market structure. The extent to which these evolving conditions will prolong or shorten the current bear market cannot be definitively determined.

Additionally, the potential impact of new financial products, such as spot Bitcoin ETFs, on accelerating market recovery or changing investor participation patterns remains an open question. There is limited data on how such innovations might interact with existing market dynamics.

Finally, there is no conclusive evidence that any leading economic indicators consistently precede shifts in Bitcoin market cycles. Current understanding suggests these indicators are primarily reactive, complicating efforts to forecast market turns.

What to watch next

Developments in Federal Reserve interest rate policies and inflation data, which could influence investor risk appetite and Bitcoin price trends.
Updates from institutional Bitcoin ETF filings and inflows/outflows, providing delayed but valuable insights into shifts in market sentiment.
On-chain metric trends, particularly realized price, MVRV ratios, and supply held by long-term holders, to monitor potential signs of market bottoming.
Regulatory decisions or approvals related to spot Bitcoin ETFs, which could affect institutional participation and market liquidity.
Macro-financial events such as banking sector stress or geopolitical developments that could abruptly alter market dynamics.

While the prediction of a Bitcoin bear market lasting until late 2026 offers a framework for understanding current trends, the actual timeline and price bottom remain uncertain. Market participants must weigh a complex interplay of on-chain data, macroeconomic forces, and institutional behaviors, acknowledging that no single indicator provides definitive guidance. The extended bear market phase underscores the evolving maturity of the crypto market and the challenges inherent in forecasting its cycles.

Source: https://cryptopotato.com/bitcoin-bear-market-to-last-months-may-not-bottom-until-late-2026-analyst/. This article is based on verified research material available at the time of writing. Where information is limited or unavailable, this is stated explicitly.