David Bailey: The Bitcoin bear market is still far off

David Bailey, entrepreneur and Bitcoin advisor to President America Donald Trump, stated that there will be no more Bitcoin bear markets in the coming years, amid increasing institutional interest in the crypto market.

David Bailey – Entrepreneur and Bitcoin advisorHowever, the 4-year cycle shows the opposite, and analysts say there are still many unfavorable factors that could pull the market down.

"This is the first time we have witnessed the real participation of institutions. Each country, bank, insurance company, corporation, pension fund, and many other parties will own Bitcoin. This process has begun in earnest, but we have yet to capture even 0.01% of the total potential market (TAM). We will go much further. Let the dream soar high," Bailey wrote on X last Saturday.

He stated that in the past, the interest of organizations only came from "exceptional cases with small stakes."

Bailey, the founder of Bitcoin Magazine and BTC Inc., was a consultant in Donald Trump's presidential campaign and is regarded as a central figure in his Bitcoin turnaround.

In the past two years, organizations have gradually expanded their access to crypto through investment products such as ETF funds and the establishment of crypto reserves — with total holdings exceeding the 100 billion dollar mark, primarily in Bitcoin.

Possible Causes Leading to a Bear Market

A report in June from the venture capital firm (VC) Breed stated that very few of the companies holding this reserve can survive long-term and that it will trigger the next bear market.

CK Zheng, co-founder and investment director of ZX Squared Capital, stated that crypto still has a strong correlation with the stock market. If stocks enter a bear market, then "crypto will follow suit."

At the beginning of this year, the stock market nearly slipped into a bear market, but according to Zheng, it has recovered and since then there have been many new factors that have reduced the risk of this scenario repeating.

"The current question is whether a bear market will occur in the remaining part of the year. It's an interesting topic to discuss, but my personal view is that this possibility is unlikely, especially after the Fed shifted towards lowering interest rates and Jerome Powell's speech last Friday. Right now, this is one of the biggest signals indicating that the Fed is ready to cut interest rates, likely as soon as September. This could perhaps mark the beginning of a new low-interest-rate cycle, based on economic data and the weakening of the labor market," he said.

Meanwhile, Pav Hundal, Head of Market Analysis at the Australian crypto brokerage Swyftx, stated that the market is currently in a risk-on state and this has driven capital flows into strong momentum assets like Bitcoin and Ethereum (ETH).

However, he expects that the capital will rotate back into fixed income instruments at some point.

"The path of least resistance for Bitcoin is upward, but that doesn't mean the bear market is still years away. Macroeconomic shocks often occur when you least expect them. I believe we will continue to see what is happening now, which is a gradual decrease in price volatility with each cycle. Interest rate hikes are a politically sensitive issue, but the market is expecting a rebound next year, and that could become a catalyst for adjustments," Hundal said.

Will the crypto bear market come to an end?

The most recent bear market occurred in 2022 and before that in 2018. In both cases, a strong bull market had taken place just before the crash.

Source: LinRyan McMillin, co-founder and investment director of the crypto investment management firm Merkle Tree Capital in Australia, stated that the current baseline scenario indicates that the cycle peak will occur around Q2/2026.

"If or when global liquidity turns around at that time, it is likely to trigger a relatively mild bear market by mid-2026. The unwinding of leverage from Bitcoin purchases made with debt or a regulatory shock could spark a downturn. Direct access trading (DAT) and institutional markets generate massive demand streams, but also come with risks. Some DAT may enter late, using excessive leverage and unprepared for volatility – a factor that makes this type of asset attractive – and could become a catalyst for the next bear market."

However, McMillin also believes that there is still a possibility that no bear market will occur, "similar to gold after the ETF launched in the early 2000s, when this asset was financialized and only went up for 8 years."

Another factor is that the bull market always leads the bear market. Without a parabolic bull run, there won't be a deep and prolonged bear market.

"So far, the upward trends in this cycle have always been accompanied by periods of consolidation, rebalancing of leverage, and the bull market continues. If this structure is maintained, then there will be no bear market. Instead, there will only be regular corrections, which are inherently great buying opportunities," McMillin concluded.

Minh Anh