Is bitcoin heading for $40k or has the bottom already formed?

Bitcoin has slipped into what many analysts are calling a new bear phase, and the big question is simple: how low can it go? Some data-driven models are pointing toward the $40,000 area, while others argue the bottom is already in. Let’s break down both sides.

The two on-chain metrics that have called every bitcoin bottom

Over the past decade, two on-chain metrics have done a surprisingly good job of marking major bitcoin bottoms: realized price and balanced price. Both try to estimate what the market actually paid for BTC, rather than just looking at the current spot price.

Realized price: the market’s average cost basis

Realized price is roughly the average price at which all existing bitcoin last moved on-chain. Think of it as the market’s average cost basis. When BTC trades above realized price, the average holder is in profit. When it trades below, the average holder is underwater.

At the time discussed, realized price sat around $54,000. Historically, in mid-cycle bear phases, bitcoin has tended to break below realized price before finally bottoming out.

Balanced price: adjusting for long-dormant coins

Balanced price goes a step further. It discounts coins that haven’t moved for years—coins that are effectively locked up and not part of the active trading supply. By down-weighting those dormant coins, balanced price tries to capture the true cost basis of coins that are actually circulating.

Currently, balanced price is estimated around $40,000. In every midterm year so far—2011, 2015, 2018, and 2022—bitcoin has first broken below realized price and then fallen to, or slightly below, balanced price to form a bottom.

For example:

• In 2018, balanced price was about $4,000 and BTC bottomed near $3,200.
• In 2022, balanced price was around $15,900 and BTC bottomed near $15,700.

That pattern is why many analysts see the $40,000 zone as a realistic downside target if the current bear move continues.

What past cycles say about a potential $38k–$40k low

On top of on-chain models, historical drawdowns also point in the same direction. Investment firm Stifel has projected a cycle low around $38,000, based on how deep previous bear markets have gone.

Each bitcoin cycle peak-to-trough drawdown has been getting slightly shallower:

• 2011: ~93% drop
• 2015: ~84% drop
• 2018: ~83% drop
• 2022: ~77% drop

If that trend continues and this cycle bottoms around a 70% drawdown from the peak, it would land near $38,000—almost exactly where the balanced price model is clustering.

For a deeper dive into how these historical drawdowns work and where a bottom might form, you may also like this breakdown of where bitcoin is likely to bottom and how bad the drop can get.

The 200-day moving average rejection

The 200-day moving average (200D MA) is a classic line in the sand between long-term bullish and bearish regimes. In every major bear market, bitcoin has tended to rally back up to the 200D MA, get rejected, and then break down further.

In the current move, BTC recently rejected from around $82,000 at its 200D MA—still well above both realized price (~$54,000) and balanced price (~$40,000). If past patterns repeat, a clean break below realized price and then a test of balanced price would be the next steps before a durable bottom forms.

Timing: how long do bear legs usually take?

Timing is always tricky, but historical patterns can offer rough guideposts. Analyst Ben Cowen has highlighted that in past bear markets, there has typically been about 140–170 days between a local low and the point when that low is broken and a new bottom is set.

With the previous local low formed on February 6, that window would suggest the possibility of bitcoin breaking below the $60,000 area sometime around July, if the pattern holds. It’s not a guarantee, but it’s one more data point aligning with a deeper correction.

Order books, institutional demand, and a fragile floor

Under the surface, the spot market has been heavily influenced by a small group of large buyers—mainly institutions and ETFs—absorbing a lot of supply. That can create the illusion of a strong floor, but it can also make things fragile if those buyers step back.

In March, for example:

• MicroStrategy and spot ETFs bought around 94,000 BTC.
• The rest of the market sold about 157,000 BTC into that demand.
• Net demand was negative roughly 63,000 BTC.

In other words, a handful of big players were catching everything the broader market was dumping. Price held up because that institutional bid was strong. But if those buyers pause or reduce allocations, there isn’t much of a second layer of demand underneath, which could accelerate any downside move.

The macro backdrop is not exactly friendly

The wider macro environment also leans cautious and could weigh on bitcoin risk appetite:

• Warren Buffett is reportedly sitting on around $397 billion in cash, his largest defensive cash pile ever. The last two times he went this defensive were before the 2000 dot-com crash and the 2008 financial crisis.
• Tech companies saw about 81,000 layoffs in Q1, one of the worst quarters in recent years.
• Key crypto legislation such as the Clarity Act is stalling in the U.S. Senate, adding regulatory uncertainty.
• Oil has spiked above $100 a barrel amid conflict in the Middle East, raising inflation and recession concerns.

None of this screams “risk-on.” If anything, it argues for institutions to trim or at least pause new bitcoin allocations, which fits with the bear case for a deeper correction.

The bull case: why some say the bottom is already in

Despite all the bearish signals, there’s a strong argument that this cycle is structurally different from 2018 or 2022. The core of the bull case is that the buyer base and market infrastructure have changed dramatically.

Massive institutional and whale accumulation

Several factors support the idea that a new, more resilient floor may already be in place:

• MicroStrategy alone has bought more than 140,000 BTC this year.
• Spot bitcoin ETFs now collectively hold around $102 billion in BTC.
• Whales accumulated roughly 270,000 BTC in a single month earlier this year.
• Exchange reserves have fallen to a seven-year low, as coins move off exchanges into long-term storage.

Lower exchange balances generally mean less immediately available supply to sell, which can reduce selling pressure and make sharp, extended drawdowns harder to sustain.

Another bullish argument: many of the panic sellers may have already been flushed out during the February drop. What remains could be a more patient investor base that doesn’t react to the same price levels that used to scare retail holders.

Technical signals flipping bullish

On May 7, two well-known analysts publicly suggested that the bear market might already be over:

• Tom Lee (Fundstrat) highlighted what he calls the “three-month rule.” In bitcoin’s history, it has never posted three consecutive green monthly closes during a bear market. With March and April closing positive, if May also finishes green, his rule would imply the bear market is done.
• John Bollinger, creator of the Bollinger Bands indicator, said his model had flipped bullish on bitcoin and reportedly went all in.

MicroStrategy’s Michael Saylor has echoed this view, arguing that the surge in institutional adoption, ETF flows, and long-term accumulation is evidence that the bottom is already behind us.

If you’re interested in how fear and sentiment shifts can sometimes mark major turning points, you might also find this analysis of why bitcoin is getting crushed by fear and what might come next useful.

What to watch next

Over the next few months, one side of this debate will be proven wrong. Here are the key levels and signals to keep an eye on:

• Realized price (~$54k): A sustained break below this level would suggest the average holder is underwater and could open the door to a deeper slide.
• Balanced price (~$40k): Historically, this is where major bottoms form. A test of this zone would align with past mid-cycle bear markets.
• 200D moving average: Continued rejection and lower highs would support the bear case. A strong reclaim and hold above it would favor the bulls.
• ETF flows and institutional buying: Ongoing inflows would help support price. A clear slowdown or reversal could expose how thin underlying demand really is.
• Macro risk sentiment: Signs of easing inflation, improving growth, or clearer regulation could flip institutions back to risk-on mode faster than many expect.

For now, the data-driven bear case points to a possible bottom somewhere in the high-$30,000 to low-$40,000 range. The bull case argues that new structural demand, ETF flows, and a more mature holder base mean the worst may already be behind us.

As always, none of this is financial advice. It’s a framework for thinking about where bitcoin might be headed next—and a reminder that in crypto, both risk and opportunity tend to show up when the market is most divided.