Bitcoin Bear Market Fears Grow as Liquidity Dries Up and Institutions Step Back

TLDR:

A $19B liquidation event erased leverage rapidly, leaving markets unable to restore depth or confidence.
Persistent ETF outflows show institutions reducing exposure through measured exits, not panic selling.
Thin liquidity and absent market makers have changed execution conditions across major crypto venues.
Elevated stock correlation and high rates position Bitcoin closer to risk assets than digital gold.

Bitcoin bear market debates intensified after a widely shared assessment by DeFi commentator Hanzo framed October 10 as a structural break. 

The analysis described a shift from routine volatility to sustained market dysfunction. Bitcoin’s peak near $126,000 preceded a rapid collapse linked to global macro pressure. What followed, according to the account, was not a standard correction.

 Liquidity vanished, confidence eroded, and recovery attempts stalled. The argument positions current conditions as a systemic reset rather than a temporary weakness, leaving participants reassessing risk across digital assets.

Liquidity Shock and Institutional Retrenchment

In a post circulated on X, Hanzo described October 10 as the moment market structure fractured. 

He pointed to $19 billion in liquidations within a single day. Bitcoin reportedly dropped from $126,000 to $104,000 in minutes. Over 1.6 million leveraged traders were forced out, creating a vacuum rather than a rebound.

Market makers, according to the same commentary, reduced exposure and did not return at scale. 

Order books have remained thin months after the selloff. Unlike past crashes, bids failed to refill quickly. This absence of depth changed execution dynamics and widened spreads across major trading venues.

Institutional positioning added to the strain. BlackRock’s IBIT ETF recorded roughly $2.7 billion in outflows over six weeks. 

Ethereum ETFs reportedly saw $224 million exit in one mid-December session. Hanzo noted that withdrawals appeared orderly, signaling risk reduction rather than panic.

Market Confidence, Correlation, and Asset Quality

The commentary also addressed asset quality and retail sentiment. Hanzo stated that nearly 99% of new tokens resembled pump-and-dump structures. 

Scam-related losses reportedly exceeded $3 billion during the first half of 2025. Meme coin valuations fell sharply, with many former billion-dollar projects trading near zero.

Sentiment indicators reinforced the cautionary tone. The Fear and Greed Index hovered near 16, indicating extreme fear. 

Search interest for “Bitcoin bear market” reached five-year highs. Total crypto market capitalization declined from $4.3 trillion to under $3 trillion during the period discussed.

Macroeconomic alignment further shaped perceptions. Bitcoin’s correlation with the Nasdaq was cited near 46%, reflecting risk-asset behavior. 

With interest rates elevated, capital rotated defensively. Even long-term advocates adjusted posture. Strategy announced a $1.44 billion cash reserve, while expectations for rapid upside moderated. 

Within this context, the Bitcoin bear market narrative gained traction as structural rather than cyclical.