Bitwise Senior Investment Strategist Juan Leon stated that the current Bitcoin bear market is structurally the mildest on record, with a 50% drawdown compared to 78% in 2022 and 84% in 2018. The reduced severity reflects a fundamental shift in Bitcoin's holder base from retail speculators to professional institutional allocators. According to Leon speaking to The Block, institutional clients are now asking about entry points and position sizing rather than whether crypto will survive. Since April, spot Bitcoin ETFs have seen over $4 billion in outflows while memory-chip ETFs attracted roughly $12 billion in inflows, a gap Bitwise expects to reverse. The current bear market has lasted approximately eight months with Bitcoin trading below its True Market Mean and Short-Term Holder Cost Basis for five consecutive months, one of the longest deep-value stretches in the asset's history according to Glassnode data.
Bitcoin Drawdown Reaches 50% Compared to 78% in 2022 and 84% in 2018
The current Bitcoin drawdown of 50% is significantly smaller than the 78% swing in 2022 and the 84% drop in 2018. Leon called it Bitcoin's "mildest structural bear market" on record. The current cycle has lasted roughly eight months, while previous bear markets ran approximately 12 to 13 months.
Onchain data from Glassnode shows Bitcoin has traded below its True Market Mean and Short-Term Holder Cost Basis for five consecutive months. Long-term holder loss realization recently peaked at $280 million per day, the highest since December 2022, and now accounts for 43% of total realized value onchain, up from 15% in early February.
Institutional clients have split into two distinct camps according to Bitwise. Those who built Bitcoin allocations over the past two years are treating the downturn as a buying opportunity, using it to rebalance portfolios and dollar-cost average at lower prices. A second group representing large pools of capital that never fully committed is waiting for greater regulatory clarity before moving. "In 2022, clients asked whether crypto would survive," Leon said. "In 2026, they're asking about entry points and position sizing."
Institutional Holders Replace Retail Speculators as Dominant Bitcoin Base
Leon stated that Bitcoin's price floor is rising with each successive bear market due to a shift in who holds the asset. "The floor is rising every cycle, and that's not an accident," Leon said. "It's what happens when an asset matures and the marginal holder shifts from retail speculator to professional allocator."
Professional allocators including pension funds, asset managers, and family offices have longer time horizons and investment mandates that differ from retail buyers. As they replace retail speculators as the dominant holders, each cycle's bottom lands higher than the last.
Several bottoming signals are surfacing according to Leon, including oversold momentum readings, roughly half of Bitcoin holders currently underwater on their investments, and renewed accumulation by long-term holders. June's record spot Bitcoin ETF outflows represent capitulation rather than abandonment in Leon's analysis.
Glassnode data shows the 30-day average of spot Bitcoin ETF net flows shifted into a monthly outflow regime in mid-May, peaked at negative $193 million per day in early June, and has since eased to around negative $89 million per day. Daily ETF trading volume of $650 million to $950 million remains roughly 80% below the $4.4 billion peak recorded in October 2025. QCP Capital noted that ETF flows swung from a low of negative $691.7 million on June 25 to positive $265.7 million on July 6.
AI Boom Diverts $12 Billion to Memory-Chip ETFs Since April
Leon stated that "enthusiasm around artificial intelligence has siphoned away billions of dollars that might have otherwise flowed into crypto." Since April, memory-chip ETFs have attracted roughly $12 billion in inflows while spot Bitcoin ETFs have seen more than $4 billion in outflows.
Leon noted that Bitcoin miners are expanding into AI and high-performance computing, indicating that demand for compute infrastructure is real. The longer-term view from Bitwise is that AI and crypto will become more complementary, with agentic AI systems starting to rely on programmable money, machine-to-machine payments, and stablecoin rails.
Leon's cyclical logic is that once AI capital expenditure expectations get fully digested and relative valuations compress, allocators will rotate toward assets that are 50% off their highs with improving fundamentals.
Clarity Act Remains Stalled Before August Recess
The Clarity Act, the U.S. regulatory framework that would define how digital assets are classified and traded, remains stalled. Leon stated he does not expect it to clear Congress before the August recess.
"What the Clarity Act changes is the permission structure for trillions of dollars of new institutional capital," Leon said. Large institutional investors including endowments, sovereign wealth funds, and major asset managers often operate under mandates that require regulatory certainty before they can allocate to new asset classes.
Crypto Market Infrastructure Grows Despite Price Weakness
Bitwise Chief Investment Officer Matt Hougan stated last week that crypto is nearing the end of its current bear market. Hougan pointed to the selloff in Strategy's STRC preferred shares as mirroring the kind of end-of-cycle deleveraging that has historically preceded new Bitcoin bull markets.
Bitwise's latest quarterly Crypto Market Review identifies continued growth in institutional infrastructure, expansion in tokenized real-world assets, and adoption by traditional finance firms as evidence that the industry's underlying fundamentals are gaining strength despite one of the weakest quarters for crypto prices in recent years.
Leon flagged the July 14 CPI print and upcoming Federal Reserve meetings as key data points likely to influence the macro backdrop for crypto in the weeks ahead. Geopolitical tensions including recent events in the Middle East have added uncertainty to broader risk assets.
FAQ
What makes the current Bitcoin bear market structurally different from 2018 and 2022?
The current Bitcoin drawdown of 50% is significantly less severe than the 78% swing in 2022 and the 84% drop in 2018. Bitwise Senior Investment Strategist Juan Leon describes it as Bitcoin's "mildest structural bear market" on record, reflecting a shift from retail-dominated selling to a more professional institutional holder base that is less prone to panic selling.
How are institutional investors responding to the current Bitcoin downturn?
Institutional clients have split into two groups according to Bitwise. Those with established Bitcoin allocations over the past two years are using the dip to rebalance and dollar-cost average at lower prices. A second group representing large pools of capital without existing positions is waiting for greater regulatory clarity, specifically passage of the Clarity Act, before committing capital.
What impact has the AI boom had on Bitcoin investment flows?
Since April, memory-chip ETFs have attracted roughly $12 billion in inflows while spot Bitcoin ETFs have seen over $4 billion in outflows. Juan Leon stated that "enthusiasm around artificial intelligence has siphoned away billions of dollars that might have otherwise flowed into crypto." Bitwise expects this dynamic to reverse once AI capital expenditure expectations normalize and allocators seek undervalued assets with improving fundamentals.
