Bitcoin may not have reached its bottom just yet, according to a new report from NYDIG. The firm believes the ongoing 2025–2026 correction is starting to mirror the major bear markets seen in 2014, 2018, and 2022, raising the possibility of another leg lower before the next recovery begins.
According to NYDIG’s Q2 report, the weakness isn’t coming from a broader market selloff. Instead, the firm says Bitcoin is facing crypto-specific headwinds, with weak spot demand, growing leverage, and changing institutional behavior weighing on prices. Here’s what is happening beneath the surface!
History Points to a $38K–$39K Bottom
Bitcoin ended the first half of the year down 32.9%, including a 13.4% decline in Q2. The sharp drop stood out because traditional markets performed strongly during the same period. Technology stocks gained 43.5%, while the Nasdaq 100 rose 27.7%, suggesting Bitcoin’s weakness was driven by factors unique to the crypto market rather than a broad risk-off environment.
NYDIG compared the current cycle with Bitcoin’s previous four-year bear markets and found striking similarities in both the depth of the decline and the time taken for the correction to play out.
If history repeats itself, Bitcoin could fall to around $38,000–$39,000 later this year before establishing a cycle bottom.
So far, Bitcoin has already dropped nearly 50% from its October 2025 all-time high of around $126,000, making this one of its steepest corrections in recent years.
Strategy Became a Major Market Concern
One of the biggest changes came from Strategy (formerly MicroStrategy). The company introduced a Digital Credit Capital Framework.
- It authorized up to $1.25 billion in Bitcoin monetization, marking its first formal mechanism for selling BTC.
- Funds could be used for:
- Building U.S. dollar reserves
- Paying preferred dividends
- Covering interest expenses
- Share repurchases
According to NYDIG, this changed the narrative, as one of Bitcoin’s biggest buyers is no longer viewed as a one-way accumulation machine.
ETF Flows Show Weak Spot Demand
As per the report, institutional demand also remained soft.
- U.S. spot Bitcoin ETFs recorded around $4.9 billion in net outflows during Q2.
- Major outflows came from BlackRock, Grayscale and Fidelity funds.
- The exception was Morgan Stanley’s new Bitcoin ETF, which attracted $364.8 million in inflows, showing distribution still matters.
Leverage Is Rising Faster Than Demand
NYDIG warned that derivatives markets are rebuilding leverage even as spot demand weakens.
- Futures open interest continues to rise.
- Funding rates remain positive, meaning leveraged longs are increasing.
- Stablecoin market capitalization has fallen by roughly $11 billion, showing fresh capital is leaving the crypto ecosystem.
- Without ETF inflows and stablecoin growth, the report warns leverage could trigger another liquidation-driven decline.
Major Catalysts to Watch
NYDIG said several events could decide Bitcoin’s next move:
- The Senate’s July-August window is viewed as the last realistic opportunity before political hurdles increase. Ethics concerns and stablecoin yield provisions remain key sticking points.
- With no clear policies yet, the higher interest rates under Fed Chair Kevin Warsh continue to pressure liquidity-sensitive assets like Bitcoin.
- Another notable mention is the Iran tensions as per the report, higher oil prices could keep inflation elevated and delay rate cuts.
- Moreover, Trump signed two executive orders focused on quantum technology. While not an immediate threat, Bitcoin may eventually require coordinated upgrades to quantum-resistant cryptography.
- Meanwhile, the KelpDAO bridge exploit revealed the ongoing infrastructure and security risks across decentralized finance.
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