Investors brace as Bitcoin faces 70% drawdown warning

Bitcoin’s price could face a 70% drawdown during the next bear market, according to a recent analyst forecast. This warning comes amid a broader market correction, with Bitcoin having already declined 28% from its January 2025 peak of $109,350 to $78,000 by late February 2025. The technical indicators, including the 200-day moving average and the Relative Strength Index (RSI), have confirmed a bearish trend, with the RSI falling to 20—a level indicative of extreme pessimism among traders. The drawdown is not an isolated event but rather part of a broader pattern that has historically marked bear markets in the cryptocurrency space.

The current bear market is shaped by a convergence of macroeconomic, regulatory, and behavioral factors. Regulatory pressures, particularly the U.S. Securities and Exchange Commission’s (SEC) delayed approval of Ethereum Options ETFs in Q1 2025, have added downward pressure. Meanwhile, geopolitical tensions, such as the Trump administration’s trade wars with major economies like China and the EU, have exacerbated uncertainty. The launch of the controversial TRUMP meme coin further eroded market trust, contributing to a broader sense of instability. These external pressures have amplified the bearish sentiment, making institutional investors more cautious and reducing liquidity.

Market sentiment has deteriorated sharply, as reflected by the Fear & Greed Index, which plummeted to a reading of 20 in February 2025—indicating a state of fear. This psychological shift has created a self-reinforcing cycle of selling pressure, as negative headlines drive further pessimism. On-chain data also highlights this downturn: active Bitcoin addresses dropped from nearly 1.4 million to 1.1 million between January and February, and the Bitcoin hash rate has declined as miners offload reserves to cover operational costs. These indicators collectively paint a picture of a market in distress, with both retail and institutional participants reassessing their exposure.

Historically, bear markets in cryptocurrency tend to last around 10 months on average, though some cycles, like the 21-month downturn between 2021 and 2022, can persist much longer. The 2025 bear market has already entered its third month, and factors such as prolonged regulatory uncertainty and macroeconomic headwinds could extend its duration. For instance, the Federal Reserve’s benchmark interest rate remains at 4.25%–4.5%, and any signs of rate cuts may take time to impact the crypto market positively. Geopolitical developments, including escalating U.S.-EU trade tensions, also pose risks that could prolong the bearish trend.

Amid this environment, investors are being urged to adopt disciplined strategies. Position sizing is critical, with experts recommending that exposure to any single asset be limited to between 2% and 5% of a total portfolio to mitigate losses. Stop-loss orders are also advised to prevent emotional decision-making during sharp declines. Diversification across traditional and digital assets can offer a buffer against crypto’s inherent volatility. For long-term holders, the bear market presents opportunities to accumulate Bitcoin at lower prices, although patience and risk management are essential during this phase.

The potential for a 70% drawdown underscores the need for caution. While historical cycles suggest eventual recovery, the current bear market is being shaped by a complex interplay of factors, making it difficult to predict a precise timeline for a reversal. As Bitcoin’s price continues to test critical support levels, the market will likely remain volatile until a clearer trend emerges. Investors are advised to stay informed, monitor key indicators, and remain prepared for further corrections before the next bull phase begins.