According to Wall Street veteran and mathematician Fred Krueger, Bitcoin bear markets occur for exactly two reasons. The first is when global liquidity turns negative, typically during periods of Federal Reserve tightening. The second is forced selling triggered by Bitcoin-specific shocks, such as events involving Mt. Gox, miners, or fraud. Krueger supports his assertion with data, emphasizing that all other factors essentially amount to noise.
Traders generally define a “bear market” as a price drop of 20% or more for an asset, indicating that prices are low and expected to continue declining for an extended period. Krueger outlines several instances when Bitcoin entered bear markets and the triggers behind each decline.
In 2011, Bitcoin fell from $32 to $2, a 93% drop that coincided with the end of quantitative easing and tightening of the U.S. dollar. During this time, the stock market also entered a stealth bear phase.
Between 2013 and 2015, Bitcoin’s price dropped from nearly $1,100 to $200, an 85% decline. This period was marked by the collapse of Mt. Gox and large-scale forced selling, which significantly impacted the market.
From 2017 to 2018, Bitcoin fell from $20,000 to $3,000, an 84% decrease. This bear market coincided with the start of Federal Reserve rate hikes and quantitative tightening. Global dollar liquidity peaked during this time, and the ICO leverage experienced a violent unwind.
In March 2020, Bitcoin plummeted from $9,000 to $3,800—a 60% drop within days. This sharp decline was triggered by global margin calls and a shortage of dollar liquidity.
Between 2021 and 2022, Bitcoin’s value fell from approximately $69,000 to $15,500, a 77% drop. This period aligned with aggressive quantitative tightening, marking the fastest rate hikes in 40 years. Additionally, a series of internal failures in the crypto industry—including the collapses of Terra (LUNA), Three Arrows Capital (3AC), Celsius, and FTX—sparked a cascade of forced selling in the market.
Krueger notes a few exceptions to this pattern. The 2019 pullback was a rally failure rather than a full bear market. The 2021 China mining ban is viewed by some as a correction, not a cycle reset. Moreover, the 2023–2025 drawdowns occurred without tightening or overwhelming forced selling. Aside from these instances, no post-2013 Bitcoin bear market has occurred without either a negative liquidity impulse or forced liquidation exceeding demand.
Bitcoin has continued an extended downtrend that began in early October, characterized by a series of lower highs. At press time, Bitcoin was trading up 3.21% in the last 24 hours to $90,015, still down 28.84% from its all-time high of $126,198 reached in October. The leading cryptocurrency had previously dipped to lows near $80,000 in late November.
https://bitcoinethereumnews.com/bitcoin/two-key-reasons-bitcoin-enters-bear-markets-wall-street-veteran/