Physical representations of Bitcoin and the flag of the United States (U.S.) appear as the background on a laptop computer screen in this photo illustration in Athens, Greece, on January 13, 2026. (Photo by Nikolas Kokovlis/NurPhoto via Getty Images)
NurPhoto via Getty Images
Bitcoin has experienced a decline of 25% over the past six months and is currently trading below $88,000. This drop is attributed to macroeconomic uncertainties, risk-off sentiment, and diminishing institutional flows. Following a peak near $126,000 in late 2025, decreasing enthusiasm led to a downturn. The decline was exacerbated by leveraged trading, which resulted in forced liquidations speeding up the selloff.
But where will this decline conclude?
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What Could Drive Bitcoin Lower?
- Are institutions abandoning Bitcoin? Yes, and the trend is accelerating. U.S. spot Bitcoin ETFs recorded outflows of $4.57 billion during November and December 2025—their worst two-month performance on record. The week ending January 23, 2026, saw $1.33 billion in outflows, marking the largest weekly redemption since February 2025. BlackRock’s IBIT and Fidelity’s FBTC were the main contributors to the exits. This reflects structural de-risking rather than just temporary profit-taking.
- What do the technicals indicate? Bitcoin is trading below its 365-day moving average, which is near $101,000. A bearish Kumo twist has emerged on the weekly chart—historically a signal of a bear market. Prices remain stuck within the range of $85,000 to $92,000, with selling pressure evident at each rally attempt. Momentum is fading.
- Why does macro uncertainty matter? Bitcoin is now behaving like a high-beta tech asset rather than a safe haven. When risk appetite diminishes, Bitcoin declines along with equities. The Federal Reserve’s cautious position regarding rate cuts, the strength of the dollar, and high valuations all create headwinds.
- What does on-chain data reveal? Experienced investors who hold between 100 and 1,000 Bitcoin are exiting the market. This group exhibited similar behavior in late 2021 before the substantial drawdown in 2022. When savvy investors begin to distribute at high prices, it indicates expectations for lower returns ahead.
How Low Can Bitcoin Go?
CryptoQuant anticipates a medium-term downside target of around $70,000, with a more significant pullback possibly hitting $56,000—Bitcoin’s realized price where bear markets have historically settled. More severe scenarios have been proposed: veteran trader Peter Brandt suggests an 80% drawdown could drive prices to $25,000, while Bloomberg’s Mike McGlone warns of a potential decline to $10,000. These scenarios necessitate catastrophic conditions—such as a hard economic landing, major policy missteps, or total institutional withdrawal. They represent tail risks, not base cases.
The leverage flush that occurred in October 2025 has already taken place—resulting in $20 billion in liquidations. Futures open interest has dropped by 40% from its peak. The deleveraging process is finished, which lowers the risk of a crash but also makes the market more sensitive to institutional flows.
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Historical Precedence
- May 2021: Bitcoin plummeted approximately 50% from $58,000 to $30,000 due to Tesla’s withdrawal from Bitcoin, China’s mining crackdown, and environmental concerns. It took 6 months for recovery—by November 2021, Bitcoin reached new all-time highs of over $68,000.
- November 2021: This was the most significant drawdown. Bitcoin fell 78% from about $69,000 to below $16,000 by November 2022. Recovery required 28 months, with a return to $68,000 in March 2024, spurred by spot Bitcoin ETF approvals.
- May-November 2022: Bitcoin dropped 50% from roughly $32,000 to below $16,000. This occurred as part of the wider bear market of 2022, necessitating 16 months to recover beyond the May 2022 levels.
The pattern? Sharp corrections of 40-50% tend to recover within 6-16 months. More profound bear markets, characterized by 70-80% declines, typically take 24-28 months to recover. The current scenario exhibits characteristics of both—not as drastic as the 77% crash of 2022, yet the institutional de-risking reflects similar structural challenges from that period.
Potential Recovery
- When might flows reverse? Jerome Powell’s term as Fed chair concludes in May 2026. The markets are anticipating a dovish successor, which could enhance liquidity and strengthen Bitcoin demand. The Clarity Act, expected in early 2026, could facilitate $50 billion in institutional inflows by mid-2026 through regulatory clarity.
- Is the supply-demand dynamic favorable? Yes, on a structural level. Long-term holders have resumed accumulation after a three-month phase of distribution. Corporate treasuries continue to buy during periods of volatility. Despite market turbulence, U.S. spot Bitcoin ETFs drew over $20 billion in total flows during 2025, with approximately $120 billion in assets under management. The groundwork for renewed accumulation is present—it merely requires a catalyst.
- What are realistic recovery targets? Conservative estimates suggest $120,000-$170,000 by the end of 2026, assuming that ETF flows stabilize and macroeconomic conditions improve. Carol Alexander anticipates Bitcoin entering a “high-volatility range” of $75,000-$150,000, centered around $110,000. Optimistic projections could see prices reach $200,000-$250,000 but would need sustained ETF inflows, a dovish Fed policy, and no significant regulatory shocks.
- How quickly could recovery occur? ETF outflow surges often signal local bottoms. Current weekly outflows replicate the pattern seen in November 2025, when Bitcoin bottomed around $80,000 before swiftly recovering above $90,000. The average cost basis for ETF investors is at $84,099—a crucial support level. If Bitcoin sustains this position, selling pressure might diminish, potentially setting the stage for a recovery in Q2 2026.
Bottom Line
Bitcoin’s decline is not over. The near-term trajectory points towards $70,000-$75,000, with $56,000 being feasible if ETF outflows persist. A drop below $50,000 would necessitate catastrophic scenarios—an unlikely prospect considering the existing spot ETF framework, corporate adoption, and regulatory advancements.
Recovery hinges on macroeconomic catalysts. A dovish pivot from the Fed post-May 2026 could stabilize conditions by Q2-Q3. Regulatory clarity would help restore institutional confidence. Historical trends suggest a 12-18 month recovery back towards the range of $120,000-$150,000 is feasible if these conditions arise.
If institutional flows remain negative and liquidity tightens, Bitcoin might spend 2026 consolidating between $70,000-$100,000, delaying any real recovery until 2027.
The market dynamics have shifted. Bitcoin now moves in tandem with institutional capital. The process of deleveraging has concluded. The real question is not if Bitcoin will recover—but rather when institutional investment will make a return.
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