Bitcoin enters phase 2 bear market, analyst warns

Analysts warn that Bitcoin is approaching the Phase 2 bear market as volatility and liquidity trends point to further downside risk in crypto markets.

Veteran on-chain analyst Willy Woo has warned that the Bitcoin (BTC) market is strengthening its bear trend and approaching the second phase of a multi-phase downturn.

The forecast challenges persistent bullish narratives, suggesting the worst lies ahead for the world’s largest cryptocurrency.

Phase 1 is nearing its end as volatility causes problems

In a series of posts on X on February 18, Woo outlined a three-phase bear market framework, which positions Bitcoin at a crucial time. According to him, the first phase of the current bear market started in the third quarter of 2025, when liquidity first collapsed and the price started to follow.

He explained that the main signal comes from volatility metrics used by quantitative analysts, with Bitcoin entering a prolonged decline as volatility skyrocketed. That volatility is still rising, indicating that the bear trend is gaining ground.

“At this stage, perma bulls will blindly say it’s a correction within a broader bull market, but they won’t give you any hard evidence that capital is flowing in,” Woo wrote.

The analyst added that its internal liquidity models, which are released to investors weekly, are currently matching volatility signals. According to him, the second part of the bear market will occur when global stocks start to weaken.

He argued that the largest cryptocurrency often reacts faster than stocks when capital leaves the markets due to its smaller size and higher sensitivity to liquidity shifts.

“In this bear market framework, BTC is currently in Phase 1 and close to Phase 2,” Woo said.

He characterized the latest episode as “the light at the end of the tunnel” and predicted a reversal in liquidity, with capital outflows peaking before stabilizing. However, he warned that another price capitulation could occur just before or immediately after the peak outflow.

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Cycle indicators show mixed signals for the long-term outlook

Not all analysts interpret the data as downright bearish. In a recent post, Axel Adler Jr. wrote. that Bitcoin’s Entity-Adjusted Liveliness metric peaked in December 2025 and began to decline, a pattern that lasted between 1.1 and 2.5 years in previous accumulation periods. The indicator tracks the movement of BTC against the holding time and tends to decline after the distribution periods end.

Another perspective from GugaOnChain focused on appreciation. Using the MVRV Z-Score developed by Murad Mahmudov and David Puell, the analyst said the current value of almost 0.48 places Bitcoin close to historical accumulation zones rather than overheated territory. That suggests some investors view current prices as discounted compared to average acquisition costs.