By: Steve Bruce
Bitcoin has once again reminded investors of its defining characteristic: volatility.
After declining in seven of the last eight trading days, Bitcoin has fallen more than 40% from its most recent all-time high, placing it firmly in bear market territory by traditional definitions. While sharp price swings are not unusual for digital assets, the current drawdown raises an important question for investors:
How do Bitcoin bear markets typically unfold—and where might we be in the cycle today?
To answer that, it helps to step back and examine Bitcoin’s full history.
Defining a Bitcoin Bear Market
For this analysis, we use a classic and widely accepted definition of a bear market:
- A decline of 20% or more from the most recent all-time high
- The bear market continues until a new all-time high is achieved
This approach allows for consistent comparisons across Bitcoin’s history and avoids arbitrary start or end dates.
A History of Bitcoin Bear Markets
Since 2014, Bitcoin has experienced 15 distinct bear markets, including the current decline. While each episode has its own catalyst, several consistent patterns emerge when looking at drawdowns, duration, and recovery timelines.
Historical Averages
Across all Bitcoin bear markets:
- Average maximum drawdown: 40.7%
- Average time to bottom: 101 days
- Average time to reach a new all-time high: 249 days
These numbers highlight an important feature of Bitcoin volatility: declines are often swift and severe, but recoveries can also occur faster than in traditional asset classes.
However, these averages are skewed by several short-lived pullbacks that resolved within one to two months.
Deeper Bitcoin Bear Markets Tell a Different Story
When we isolate deeper bear markets—defined as those that take at least 100 days to bottom—the risk profile changes meaningfully.
Notably, the current bear market has already exceeded this threshold.
Deeper Bear Market Characteristics
When Bitcoin bear markets take 100+ days to bottom:
- Average drawdown: 59.2%
- Average time to bottom: 215 days
- Average time to reach a new all-time high: 531 days
In other words, once a Bitcoin drawdown becomes prolonged, both the depth and duration nearly double relative to historical averages.
This distinction is critical for investors assessing downside risk and recovery expectations.
How the Current Bitcoin Bear Market Compares
From a historical perspective, the current drawdown—approximately -41.4%—is notable, but not unprecedented.
- Only four prior Bitcoin bear markets experienced larger drawdowns
- Three of those four saw declines exceeding 70%
This historical context suggests that while the current decline is meaningful, it has not yet reached the extreme downside seen in Bitcoin’s most severe bear markets.
That does not imply that further downside is inevitable—but it does indicate that history argues against assuming the correction is complete.
Why Bitcoin Bear Markets Are So Severe
Bitcoin’s drawdowns tend to be larger and faster than those seen in equities or traditional assets. Several factors contribute to this behavior:
- High leverage within crypto markets
- Reflexive investor behavior during periods of stress
- Limited natural buyers during sharp selloffs
- A market structure still evolving relative to traditional asset classes
These dynamics often lead to overshooting—both on the downside during bear markets and on the upside during recoveries.
Using History as a Guide, Not a Forecast
It’s important to emphasize that historical patterns are not predictions. Market structure, regulation, liquidity, and investor composition evolve over time. Bitcoin today is materially different from Bitcoin in 2014.
That said, history provides context.
Understanding how Bitcoin bear markets have behaved in the past can help investors:
- Set realistic expectations
- Avoid emotionally driven decisions
- Size risk appropriately within diversified portfolios
No single data point determines future outcomes—but ignoring historical precedent altogether can be just as costly.
Final Thoughts
Bitcoin’s volatility is not a flaw; it is a defining feature. Bear markets are a recurring part of its history, and they tend to be deeper and longer once key thresholds are crossed.
Whether the current drawdown ultimately proves shallow or severe remains uncertain. What history makes clear, however, is that Bitcoin bear markets rarely resolve quietly—and patience is often required before a durable recovery takes hold.
As always, disciplined risk management and a long-term perspective matter far more than attempting to time short-term market moves.
Steve Bruce, CMT is the Co-Founder and Chief Investment Officer of Bruce Wood Capital, where he focuses on systematic global macro strategies and long-horizon, data-driven research.