Here’s a clear, professional take on Bitcoin’s current setup — why sentiment is collapsing, where the risks lie, and whether a recovery in 2026 is still a reasonable base case.

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1. What the recent plunge actually tells us

Bitcoin’s peak above US$126,000 in October marked a euphoric stage driven by:

ETF inflows,

optimism over institutional adoption,

expectations of a soft landing in the US.

The subsequent ~US$600 billion wipe-out reflects how fragile the rally was. Much of it was momentum-driven, not fundamental. When inflows slowed and macro sentiment weakened, the retreat became self-reinforcing.

Retail traders, who usually enter late, are now exiting quickly — a classic sign of a maturing downtrend rather than a structural collapse.

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2. Why retail sentiment is so weak

Hougan’s comment is accurate: sentiment is soft because retail investors still carry trauma from past cycles.

Key factors:

Memories of the 2018–2019 and 2022 crypto winters.

Reluctance to tolerate another 50% drawdown, even if fundamentals look better.

The market is hyper-sensitive to macro shifts — especially US rates and liquidity.

The irony is that institutional allocators tend to view such periods as accumulation windows, while retail investors exit out of fear.

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3. Is there still downside from here?

Unfortunately, yes. Weak sentiment often means volatility is not finished.

Short-term risks include:

Further ETF outflows,

Risk-off from Fed policy shifts,

Miners selling into weakness,

Liquidity thinning during year-end.

Technically, a retest of US$95k–105k is not impossible if the trend remains heavy.

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4. Why a recovery next year is still plausible

Hougan’s optimism is not baseless. Compared to previous cycles, several structural supports exist:

Stronger institutional base

A large portion of BTC is now held in regulated ETFs and custody platforms, reducing panic-selling behaviour.

Tighter supply post-halving

The 2024 halving’s effects tend to materialise with a delay of 9–18 months.

Macro tailwinds in 2026

If global rate-cut cycles continue, Bitcoin’s attractiveness as a high-beta risk asset improves.

Corporate & sovereign adoption trend

More companies and even smaller governments are integrating Bitcoin into treasury or payment systems.

These are unlike the conditions during past crypto winters.

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5. Should investors “pull out early” like retail?

Selling solely out of fear of a 50% drop often leads to missing the strongest recovery legs. Historically:

Bitcoin’s top-performing years followed its worst drawdowns.

Staying invested with measured position sizing outperformed trying to time exits and re-entries.

That said, this depends on one’s risk tolerance. Your preference for stability suggests:

A sensible approach could be:

Small BTC exposure (1–3% of portfolio),

Use of stablecoins to scale in gradually,

Avoid aggressive leverage, especially near earnings or macro events.

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6. Bottom line

Bitcoin’s current retracement reflects weak retail conviction, macro pressure and exhaustion after a parabolic run. Further declines are possible — but the long-term structural story remains intact.

If history repeats, fear-driven selling now often precedes the next major leg up.