Crypto asset manager Grayscale stated that bitcoin's rapid recovery could signal a turning point for the market following a relatively shallow bear market. In an Aug. 22 post on X, the firm shared a chart comparing bitcoin’s current drawdown with four previous market cycles.
The assessment followed a weekly bitcoin rally of approximately $10,000 that pushed the cryptocurrency to $79,500 on Aug. 21, marking its highest price since May. The rebound broke a prolonged trading range and forced traders with bearish derivatives positions to close their bets. While short liquidations accelerated the advance, the price movement also coincided with renewed spot demand and ETF inflows.
Grayscale noted that historical bitcoin cycles have typically bottomed roughly 80% below their cycle peaks. In contrast, the latest bear market saw bitcoin fall by about 50% from its peak, representing a shallower decline than all prior cycles shown in the firm's data from Coin Metrics. The comparison includes market cycles peaking in June 2011, December 2013, December 2017, and November 2021, measured against the current cycle beginning from an October 2025 high.
Other research has similarly pointed to conditions associated with the later stages of a correction. An Aug. 18 analysis by VanEck found that eight of 12 capitulation signals were active as of Aug. 12, with all 12 having entered their capitulation zones during the preceding three months. VanEck’s Bitcoin Chaincheck analysis indicated that the drawdown could be late-stage, pointing to spot exchange-traded products, a larger institutional holder base, and the absence of major leveraged-lender failures as factors supporting a shallower trough.
However, VanEck noted that comparable signal clusters have historically produced below-baseline average returns over 90 and 180 days, and do not provide reliable short-term confirmation of a bottom.
Renewed investment through U.S. spot bitcoin ETFs also supported the recovery. The products recorded approximately $1.92 billion in net inflows over five sessions, concluding Aug. 21 with five consecutive positive trading days and total net assets of $96.07 billion.
Grayscale concluded that while risks remain—such as higher interest rates, weaker liquidity, potential fund redemptions, or profit-taking—the recent rally may indicate the formation of a more durable bottom.
