Bitcoin’s Potential Entry Into a Nightmare Bear Cycle: A Technical and Historical Analysis

Bitcoin’s price action in Q3 2025 has sparked intense debate among traders and analysts about the cryptocurrency’s potential entry into a bear cycle. Technical indicators and historical parallels suggest a convergence of bearish signals, raising concerns about a prolonged downturn. This analysis examines the evidence from both technical chart patterns and historical cycles to assess the risks.

Technical Indicators Signal Weakness

Bitcoin’s 14-month Relative Strength Index (RSI) has shown a bearish divergence, with the indicator declining despite prices rising. This divergence often precedes a trend reversal, as seen in previous market tops [1]. Additionally, the price has encountered resistance at a key trendline drawn from prior bull market peaks, further complicating the bullish case.

The Head and Shoulders pattern, a classic bearish reversal formation, has emerged on Bitcoin’s chart. This pattern, confirmed by a neckline break at $113K, suggests a potential decline after forming peaks in April and June 2025 [3]. While the inverse Head and Shoulders pattern (a bullish counterpart) has historically succeeded 84% of the time in crypto, its current application remains uncertain without volume confirmation [4]. Backtesting of the Head and Shoulders pattern in Bitcoin from 2022 to 2025 reveals key quantitative insights, including average returns, drawdowns, and hit rates, which can be explored in the interactive report.

Moving averages also present a mixed picture. On the four-hour chart, the 50-day and 200-day moving averages are declining, signaling short-term weakness [4]. However, the daily and weekly charts show bullish momentum, with the 50-day moving average rising and the 200-day moving average acting as support [5]. This duality highlights the tension between short-term bearish pressures and long-term bullish fundamentals.

Historical Parallels to Past Bear Cycles

Bitcoin’s 4-year market cycle, tied to halving events, offers a framework for understanding current dynamics. The 2018–2022 bear market, for instance, followed a halving in 2020 and saw Bitcoin plummet from $67,589 to $15,476—a 77% drawdown [2]. Similar patterns emerged in the 2015–2018 cycle, with corrections exceeding 50% driven by macroeconomic shocks like the 2020 pandemic and the 2022 Terra/Luna collapse [4].

The 200-week moving average (200WMA) has historically served as a critical support level during bear markets. In 2022, Bitcoin fell below this moving average (around $25,000) and remained there for 15 months [2]. As of 2025, the 200WMA is approaching $50,000, with projections suggesting it could reach $60,000 by late 2026 [1]. If Bitcoin’s price falls below this level again, it could trigger a prolonged bearish phase.

On-chain metrics further reinforce historical parallels. The Realized Price, which reflects the average cost basis of all Bitcoin holders, currently trades at an 11.3% discount to spot prices [3]. This “underwater” condition mirrors the 2021–2022 bear market, where investors faced massive realized losses. A similar capitulation scenario could unfold if Bitcoin’s price continues to decline.

Future Projections and Risks

Monte Carlo simulations estimate a 5% probability that Bitcoin’s price could fall below $41,000 by late 2026, with the 200WMA likely to reach $60,000 [1]. In a more optimistic scenario, where Bitcoin surges to $260,000 by 2025, the subsequent bear market could see a -69% drawdown, aligning with historical trends of declining drawdowns in later cycles [1].

The Mayer Multiple—a metric measuring Bitcoin’s price relative to its 200WMA—also suggests caution. If the multiple exceeds historical highs (around $69,000), it could signal an approaching peak [4]. Combined with RSI divergence and the Head and Shoulders pattern, these indicators paint a cautionary picture for investors.

Conclusion

While Bitcoin’s long-term fundamentals remain robust, the confluence of bearish technical patterns and historical parallels suggests a heightened risk of a nightmare bear cycle. Traders should monitor key levels like the 200WMA and RSI divergence for confirmation. For now, the market remains in a precarious balancing act, with the potential for both a sharp correction and a resilient rebound.

Source:
[1] Estimating Bitcoin's support levels for the next cycle bottom
[2] GROK's Analysis of Bitcoin's 4-Year Market Cycles
[3] A Bear of Historic Proportions
[4] Mastering Crypto Chart Patterns: A Complete 2025 Trading Guide