'This time is different': Bitcoin drop revives four-year cycle fears, but K33 says another 80% decline is unlikely

Bitcoin's BTC continued sell-off is reviving concerns that the market may be slipping back into a familiar four-year cycle pattern, even as research and brokerage firm K33 argues that a full repeat of past bear markets remains unlikely.

In a report late Tuesday, K33 Head of Research Vetle Lunde noted that bitcoin has fallen roughly 40% from its October peak, with last week alone delivering an 11% drawdown amid heightened global risk aversion.

While Lunde has long rejected the idea that bitcoin remains bound to a rigid four-year cycle — declaring in October that "the 4-year cycle is dead, long live the king" — he said recent price action is showing "unsettling similarities" to the deep sell-offs seen in 2018 and 2022, with market behavior, rather than fundamentals, increasingly driving prices.

However, he argued that the current backdrop differs from prior cycles due to growing institutional adoption, regulated product inflows, and an easing rate environment.

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Cycle psychology collides with bottom-hunting signals

Lunde argued that fears of a cycle repeating could become self-fulfilling. As long-term holders trim exposure to protect earlier gains and new capital hesitates to enter, selling pressure builds in a way that mirrors prior downturns. That pattern has emerged despite what the firm describes as stronger institutional and regulatory tailwinds, including billions of dollars in inflows into exchange-traded products, expanding advisor access, and banks launching crypto-related services.

Even so, Lunde maintains that "this time is different," saying he does not expect a 365-day peak-to-trough drawdown of 80% similar to previous cycle collapses, pointing to the easing rate backdrop and the absence of forced deleveraging events like GBTC, Luna, 3AC, BlockFi, Genesis, and FTX that amplified losses during the 2022 credit unwind.

At the same time, several indicators commonly associated with market bottoms have begun to flash, Lunde said. On Feb. 2, bitcoin recorded a 90th-percentile spot trading day, with more than $8 billion in volume as prices revisited 2025 lows. In derivatives markets, open interest and funding rates both fell into extreme negative territory following a wave of roughly $1.8 billion in long liquidations — a combination that has coincided with reversals in the past.

Lunde said that with both signals flashing while bitcoin remains above support, a bottom may be forming.

He cautioned, however, that these signals are far from definitive. Similar volume and derivatives extremes have appeared during false starts and mid-trend pauses, and evidence for a durable bottom remains mixed. Historically, reversals have tended to coincide with even more extreme volume conditions than those seen so far, hitting the 95th percentile, Lunde said.

For now, Lunde identified the area around $74,000 as a critical support zone. A break below that level could accelerate downside momentum toward the November 2021 peak near $69,000 or, further out, the 200-week moving average around $58,000, in his view. 

"With BTC nearing a flat return profile over the past two years, we sense no urgency for long-term holders to sell," Lunde said. "We will respond rapidly if the current support breaks, but we do not expect a repeat of 2018 or 2022. Instead, we view current prices as attractive entry levels for any investor with a long-term approach."