Bitcoin's Bearish Cycle Persists: Understanding the Forces Driving Near-Term Pressure Despite Long-Term Strength

Bitcoin is caught in a self-reinforcing downturn, with multiple market drivers creating what appears to be a negative feedback loop. Institutional capital rotation, shrinking liquidity pools, and weakening technical structures are all converging to fuel bearish momentum—even as the underlying long-term case for Bitcoin remains intact.

The Capital Exodus: Institutions Stepping Back

The most visible indicator of shifting sentiment comes from Bitcoin spot ETFs. BlackRock’s IBIT experienced a stunning $520 million in redemptions during its largest monthly outflow since launch, signaling that institutions are reassessing their positioning. This represents a fundamental shift: ETFs, once a stabilizing force that absorbed market sell-offs, are now accelerating downside pressure as redemptions pile up.

According to research from NYDIG, the problem extends beyond equities. Stablecoin supplies have compressed for the first time in months, with USDE’s circulating supply now standing at 6.38 billion tokens—a dramatic contraction from previous levels following October’s liquidation cascade. Similarly, digital asset treasuries that previously accumulated Bitcoin are now reversing course, either liquidating holdings or buying back shares to reduce liabilities.

“The long-term fundamentals remain sound, but the near-term landscape is being dominated by a self-reinforcing correction cycle,” market observers note, as capital withdrawal accelerates across multiple channels.

Technical Deterioration Amplifies the Selling

On the chart, the damage is evident. IBIT has broken below critical trendlines, and Bitcoin itself has slipped below key moving averages—technical levels that typically attract fresh selling pressure. Bitcoin’s market dominance has slid to 55.92%, its lowest level in recent months, while liquidations have exceeded $914 million as positions get wiped out.

The technical picture suggests deeper consolidation ahead. A head-and-shoulders pattern is forming on the weekly timeframe, which, if completed, could accelerate Bitcoin’s decline toward the $72,000–$78,000 support zone—what some analysts refer to as a potential “cycle reset” level where long-term accumulators typically re-enter.

Price Action and Market Sentiment

Bitcoin recently traded below $87,000, with the current price hovering around $90.69K and market sentiment heavily skewed bearish. Long positions accounted for 78% of recent liquidations, indicating that leveraged bullish bets are being purged from the system. Retail trader sentiment has become extremely pessimistic, with some data suggesting expectations for sub-$70,000 prices—a signal that often precedes market reversals, given that extreme pessimism is historically contrarian to actual outcomes.

The Path Forward: Institutional Adaptation

Despite the near-term turbulence, several factors suggest the downturn may be reaching exhaustion. Bitcoin’s dominance compression and the rise of altcoin strength could signal either capitulation or a genuine shift toward higher-risk assets. Institutions are beginning to explore Bitcoin-native yield strategies as passive accumulation slows, preparing for potential entry points.

The critical level to watch remains $100,000 on the weekly close—a recapture of this level would confirm a reversal of the current bearish structure. Until then, the market remains caught between cyclical selling pressure and strategic positioning for longer-term holding by sophisticated players who recognize that current pullbacks represent accumulation opportunities rather than terminal weakness.