Bitwise Strategist: Bitcoin’s Bear Market Is Shallower and Institutionally Anchored

Trading near $63,900 as of July 9, 2026 – roughly 50% below its cycle high – Bitcoin is enduring a bear market that Bitwise Senior Investment Strategist Juan Leon characterizes as structurally different from every prior cycle: shallower in drawdown, more institutionally anchored in its buyer base, and increasingly insulated from the kind of retail-driven capitulation that defined the 78% collapse in 2022 and the 84% decline in 2018. That framing carries direct implications for how long-term holders and new allocators should be thinking about current levels.

Leon told The Block that Bitwise’s institutional client base has split into two recognizable camps. Those who established bitcoin allocations over the past two years are treating the current downturn as a rebalancing opportunity – dollar-cost averaging into weakness rather than reducing exposure. The second group, representing larger pools of capital, remains sidelined pending greater regulatory clarity from Washington.

The Mildest Structural Bear Market on Record

The shift in who holds bitcoin is the core of Leon’s thesis. “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.” When the dominant holder class carries a longer time horizon and a lower propensity to panic-sell, structural drawdowns compress – not because macro conditions are more favorable, but because the bid at lower prices is more persistent.

Leon acknowledged the current eight-month bear market could extend further. Prior cycles lasted roughly 12 to 13 months before bottoming, which means the present drawdown is not yet long enough by historical standards to call a floor with confidence. Still, he pointed to a cluster of traditional bottoming indicators beginning to converge: oversold momentum readings, roughly half of bitcoin holders currently underwater on their positions, renewed accumulation by long-term holders, and record spot bitcoin ETF outflows in June that he reads as a sign of capitulation rather than structural abandonment.

The distinction matters. Capitulation outflows – where the last reluctant sellers exit – historically precede trend reversals. Structural outflows, by contrast, signal a change in the asset’s perceived role. Leon’s read is that current flows fall into the former category, a view that aligns with on-chain miner data suggesting miner position indexes have reached historically low levels.

AI Inflows, Regulatory Delay, and the Macro Overhang

Leon was direct about the macro forces actively suppressing bitcoin’s recovery. Sticky inflation has pushed rate-cut expectations further out, geopolitical uncertainty is weighing on risk assets broadly, and the artificial intelligence buildout has absorbed capital that might otherwise have rotated into crypto. Since April, Leon noted, memory-chip ETFs have attracted roughly $12 billion in inflows while spot bitcoin ETFs have seen more than $4 billion in outflows – a quantifiable measure of where institutional risk appetite is currently pointed.

He declined to call AI a bubble, arguing instead that demand for compute infrastructure is genuine and that the sectors are increasingly complementary rather than competing. Bitcoin miners expanding into AI and high-performance computing are one expression of that convergence; agentic AI systems beginning to rely on programmable money, machine-to-machine payments, and stablecoin rails are another. Leon’s framing is that the capital rotation away from crypto is cyclical – tied to AI capex enthusiasm and relative valuation compression – and will reverse as those expectations get digested and allocators look for assets trading at a discount to fundamentals.

“The cyclical path is AI capex expectations get digested, relative valuations compress, and allocators go looking for the asset that’s 50% off its high with improving fundamentals,” Leon said. The conversation Leon describes having with clients in 2026 has also changed fundamentally from prior cycles. “In 2022, clients asked whether crypto would survive,” he said. “In 2026, they’re asking about entry points and position sizing. That’s a different conversation entirely.”

Regulatory Catalyst: The Clarity Act and Trillions in Sidelined Capital

On the legislative front, Leon pointed to the Clarity Act as a key regulatory event likely to unlock a new wave of institutional participation. He does not expect the bill to clear Congress before the August recess, but he was explicit about its structural significance: “What the Clarity Act changes is the permission structure for trillions of dollars of new institutional capital.” The implication is that much of the sidelined capital Leon’s clients represent is not waiting for a price signal – it’s waiting for a compliance signal.

The ETF channel has already demonstrated its capacity to move bitcoin’s price on a week-to-week basis; legislation that expands the permissible universe of institutional holders would operate on a different scale and a longer time horizon.

These views from Leon echo those of Bitwise Chief Investment Officer Matt Hougan, who argued last week that the recent selloff in Strategy’s STRC preferred shares mirrors the kind of end-of-cycle deleveraging that has historically preceded new bitcoin bull markets. Bitwise’s latest quarterly Crypto Market Review reaches a similar conclusion: despite one of the weakest quarters for crypto prices in recent years, institutional infrastructure continued to grow, tokenized real-world asset adoption expanded, and traditional finance firms deepened their on-chain activity – all of which Bitwise frames as fundamental strength accumulating beneath depressed prices.

The near-term catalysts Leon flagged as most likely to move the needle – upcoming U.S. inflation prints and Federal Reserve meetings – are macro rather than crypto-specific. If those data points shift rate expectations lower, the mechanical pressure on risk assets eases and the relative value case for bitcoin versus AI-adjacent equities becomes harder for allocators to ignore. If inflation stays sticky and the Fed holds, the bear market likely extends toward the 12-to-13-month historical average. Either way, Leon’s structural argument holds: the floor is rising, even if the next few months test it.

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Source: The Block