Bitcoin has historically seen sharp rebounds after deep declines, but a rebound does not equate to a cycle reversal. During the 2022 bear market, BTC experienced several short-term rebounds around the Terra collapse, Three Arrows Capital liquidation, and FTX bankruptcy, ultimately falling to about $15,500 in November 2022; a true market turnaround requires the clearing of leverage, restoration of spot demand, and improvement in liquidity conditions to occur simultaneously.

Currently, there are signs of capital contraction: the top ten centralized exchanges saw spot trading volume drop to $1.95 trillion in Q2, a 27.9% quarter-on-quarter decline; the average daily trading volume fell to $93.1 billion, nearly 21% lower than its peak. Exchange stablecoin reserves are about $64 billion, down approximately $16 billion from the peak of about $80 billion at the end of 2025, indicating that liquidity in dollars available for immediate deployment into risk assets has not expanded.

The current situation can be compared to the crypto rebound in early 2023 and the recovery of risk assets after March 2020, but the distinction lies in the source of funds: the 2023 recovery gradually gained support from spot buying and a rise in risk appetite, while the 2020 recovery was underpinned by global monetary and fiscal easing as underlying liquidity. The market is currently transitioning from de-leveraging to repricing, and it has yet to demonstrate sufficient long-term capital to replace derivative shorts as marginal buyers.

Essentially, it is about capital concentration. In the later stages of the bear market, small to medium projects lacking cash reserves, relying on token financing and high leverage for market making, are the first to be forced to sell or exit; liquidity is concentrating towards Bitcoin, Ethereum, stablecoins, and a few assets with regulatory and institutional access. The so-called end of the bear market must first manifest as capital willing to continuously allocate in higher-risk long-tail assets, rather than just a one-time high-volatility short covering in mainstream coins.

ABAB News · Cognitive Law

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