Is Bitcoin In A Bear Market?
TL;DR
Anthony Pompliano argues Bitcoin has entered a bear market, but one structurally different from previous cycles due to reduced volatility, financialization through Wall Street products, and markets pricing in deflation rather than the previously expected inflation.
📉 The New Bear Market Structure 3 insights
Bitcoin is in a bear market, but with tempered volatility
After a 40% decline from $126,000 to $75,000, Bitcoin exhibits classic bear market price action described as a 'ball bouncing down stairs,' though reduced volatility suggests drawdowns will be less severe than historical 80% crashes.
Financialization has permanently altered market dynamics
The introduction of ETFs, covered call strategies, and options markets has allowed institutional hedging, effectively cutting Bitcoin's volatility from an '80 vol' asset to a '40 vol' asset and suppressing both upside and downside price movements.
Four-year cycle persists with modified severity
While the halving cycle remains intact, the magnitude of bull market peaks and bear market troughs has decreased proportionally with volatility, suggesting the current 40% drawdown may represent the bulk of the downward move rather than a precursor to an 80% collapse.
🌍 Macroeconomic Realignment 3 insights
Markets are pricing in deflation, not inflation
Bitcoin's decline reflects forward-looking markets adjusting to the realization that promised inflation from tariffs and fiscal policy is unlikely to materialize, with deflation emerging as the greater risk—reducing demand for inflation hedges.
Gold diverges due to central bank 'de-fiat' buying
Unlike Bitcoin, gold is rallying because central banks are purchasing it to reduce dependency on fiat currencies broadly (de-fiatization), not as an inflation hedge, whereas Bitcoin has not yet been accepted by central banks as a reserve asset for this purpose.
Previous price run anticipated inflation that never arrived
Bitcoin's rapid ascent from $70,000 to $126,000 following the election correctly anticipated inflation risks, but as those risks dissipated, the market repriced downward—demonstrating that Bitcoin 'worked' as a forward-looking asset rather than failing as an inflation hedge.
⚠️ Structural Risks & On-Chain Data 3 insights
Hash rate decline reflects grid economics, not capitulation
Recent drops in mining hash rate stem from North American miners shutting down operations during Arctic storms to sell power back to grids for higher profits (demand response), rather than signaling miner distress or impending price collapse.
Treasury company debt covenants pose contagion risk
The primary systemic risk lies with public companies holding Bitcoin on their balance sheets; if these firms face debt covenant violations or liquidation triggers forcing them to sell Bitcoin, it could trigger the type of forced selling and capitulation seen in previous cycles.
Prediction markets signal extended weakness
Polymarket data shows 72% odds that Bitcoin will trade below $65,000 at some point in 2026, indicating market participants expect this bear market to persist with potential for lower prices ahead.
Bottom Line
Treat this 40% drawdown as a tempered bear market opportunity to accumulate Bitcoin, focusing on increasing your Bitcoin stack rather than dollar value, as structural financialization and reduced volatility suggest the downside is likely capped compared to historical cycles absent an exogenous shock or forced selling contagion.
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