Bitcoin Crashes 40%, Yet Historical Cycles Suggest Calm
Bitcoin extended its recent sell-off this week, briefly plunging to the $78,000 area and marking one of the sharpest short-term declines of the current cycle.
- Bitcoin plunged to around $78,000 in a sharp sell-off that shook market confidence.
- Both analysts view the drop as a liquidity sweep rather than a cycle-ending move.
- RSI is deeply oversold and MACD is bearish, signaling intense selling pressure.
- Historically, a ~40% drawdown is mild compared with past Bitcoin bear markets.
The move triggered renewed debate among analysts over whether the drop signals deeper downside or a textbook setup for accumulation.
Two widely followed market watchers argue that the sell-off may be doing exactly what previous Bitcoin corrections have done – shaking out weak hands before a broader recovery attempt begins.
Liquidity sweep or market reset?
According to Merlijn The Trader, the latest decline fits a classic Wyckoff-style “spring” scenario. He argues that retail traders tend to fear sharp downside moves, while more experienced participants look for deep liquidity sweeps into prior demand zones. In his view, a flush into older liquidity pockets is designed to force traders out of positions, damage sentiment, and reset positioning before a new upward leg forms.
RETAIL FEARS THE SWEEP.
PROS WANT IT.
A deep Bitcoin flush into the old liquidity zone
would be textbook Wyckoff:Shake out traders.
Destroy confidence.
Then launch the next leg up.Around $69K would be the perfect spring.
Markets reward patience, just zoom out. pic.twitter.com/iuNRB3R30L
— Merlijn The Trader (@MerlijnTrader) February 1, 2026
Merlijn highlighted the $69,000-$70,000 region as a historically important zone that could serve as a final spring if the market were to extend lower. While Bitcoin did not reach that area, the rapid slide toward $78,000 already fulfilled much of the same function by triggering liquidations and a sharp sentiment shift.
From capitulation to accumulation?
A similar, though slightly more optimistic, view comes from Michaël van de Poppe, who believes the broader crypto market may be transitioning out of capitulation and into an early accumulation phase. He notes that many altcoins have already swept their October 10 lows, taking liquidity beneath recent support levels.
Van de Poppe acknowledges that additional downside remains possible, but suggests that the coming days could start to show early signs of stabilization, including the appearance of more frequent green candles as selling pressure fades.
Technical signals flash oversold
From a technical perspective, Bitcoin’s momentum indicators reflect the intensity of the recent sell-off. On the daily timeframe, the Relative Strength Index dropped into deeply oversold territory, hovering in the mid-20s during the crash. Historically, RSI readings at these levels have often coincided with short-term exhaustion among sellers, even if volatility remains elevated.
The MACD has also turned decisively bearish, with the signal lines widening to the downside and momentum accelerating during the drop. While this confirms strong bearish pressure in the near term, similar MACD structures in past cycles have frequently preceded consolidation phases rather than immediate continuation lower.
Historical drawdowns put the move in context
Despite the sharp decline, historical data suggests the current correction remains relatively modest by Bitcoin standards. At roughly 40% below its recent peak, the drawdown is significantly smaller than those seen during prior bear markets. Previous cycle bottoms formed after declines of approximately 70% to 85%, including the 2018, 2020, and 2022 downturns.
This comparison has led some analysts to argue that the latest move resembles a violent correction within a broader cycle rather than a full-scale bear market reset. While that does not rule out further downside, history shows that similar drawdowns have often marked late-stage corrections rather than long-term tops.
For now, Bitcoin remains technically fragile but historically consistent. Whether the $78,000 drop proves to be a final shakeout or a stepping stone to lower levels, analysts agree on one point – patience and perspective are critical as the market digests one of its most volatile weeks of the year.
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.
Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.
