Bitcoin Hits Bear Market Territory. History Says the Cryptocurrency Will Do This Next.

Bitcoin (CRYPTO: BTC) picked up momentum after President Donald Trump won the election last November. Its price crossed $100,000 for the first time in December 2024 and peaked near $126,000 in October 2025.

However, Bitcoin has since given back most of those gains. Its price has plummeted 27% to $92,000 as of Nov. 18, putting the cryptocurrency in a bear market.

One factor contributing to the drawdown is economic uncertainty, particularly in relation to monetary policy. Bitcoin tends to perform well when interest rates are falling, but sticky inflation has raised questions about whether the Federal Reserve will cut rates at its December meeting.

Here's what investors should know.

Image source: Getty Images.

Bitcoin just entered bear market territory for the seventh time in five years

A bear market refers to a situation in which a stock market index or asset declines at least 20% from its recent bull market high. Bitcoin hit that threshold on Nov. 14, when its price had dropped more than 20% from the bull market high it achieved about a month earlier on Oct. 7.

Investors have rotated away from risk assets, like cryptocurrencies and growth stocks, due to concerns about the economy. The U.S. jobs market weakened substantially during the summer, yet inflation has worsened due to President Trump's tariffs. If the Federal Reserve deems inflation the more severe problem, policymakers will hold interest rates steady in December.

That possibility, coupled with the broader rotation away from risk assets, has dragged Bitcoin into its seventh bear market in five years. Unfortunately, history suggests its performance will be muted over the next year.

Consider these statistics from the last six Bitcoin bear markets:

• Following its first close in bear market territory, Bitcoin has returned an average of 6% over the next six months and 1% over the next year.
• Following its first close in bear market territory, it took more than seven months (218 days) on average for Bitcoin to reach a new record high.

Past performance is not a guarantee of future results, but history says Bitcoin is likely to trade sideways over the next year. However, that should not dissuade investors from buying the dip. Bitcoin returned 38% annually over the last five years, despite suffering several bear markets.

The investment thesis for Bitcoin remains intact

The investment thesis for Bitcoin is straightforward: The approval of spot Bitcoin ETFs, coupled with a more favorable regulatory environment under the Trump administration, has already boosted demand for the cryptocurrency, and that trend is likely to continue (or even intensify) in the coming years.

Indeed, the amount of Bitcoin held on the balance sheets of public and private companies more than doubled in the past year, and it increased by 150% since the U.S. Securities and Exchange Commission (SEC) first approved spot Bitcoin ETFs in January 2024, according to Bitcoin Treasuries.

Admittedly, a large percentage of that Bitcoin is concentrated across approximately a dozen companies, with Strategy (formerly MicroStrategy) alone accounting for half the total. However, the trend is still encouraging, particularly because it's happening in conjunction with more financial institutions adding Bitcoin to their portfolios.

Forms 13F filed for the third quarter show the number of large asset managers (i.e., those with at least $100 million in assets) with positions in the iShares Bitcoin Trust (NASDAQ: IBIT) more than doubled over the past year, and the number of shares held by those large institutional investors increased 154%.

Adoption among institutional investors is particularly important because they collectively hold about $130 trillion in assets under management, meaning the price of Bitcoin could increase substantially if those fund managers allocate even a fraction of their wealth to the cryptocurrency.

Investors should remember Bitcoin has historically been very volatile. That is unlikely to change, and the current bear market could worsen in the coming months if the economic backdrop deteriorates further. Additionally, there is no guarantee Bitcoin ever regains its previous high, so investors should not put a single cent into the cryptocurrency if they cannot afford to lose it.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and iShares Bitcoin Trust. The Motley Fool has a disclosure policy.