Bitcoin’s latest flash crash may not be the end of the rally, it could be the shakeout before the next major breakout.
Analyst Merlijn The Trader compared the recent flash crash to the 2020 Covid-era collapse, calling it a “pre-bullrun signal.” According to his analysis, the current 18% drawdown from $125,000 to $111,000 echoes the pattern that preceded Bitcoin’s 2020-2021 explosion.
“A brutal dump. Disbelief. Then euphoria,” Merlijn wrote, noting that markets often purge weak hands right before a sustained upward leg.
In 2020, Bitcoin plunged 56% before rallying to new highs. In 2025, the same playbook could be unfolding as traders react to macro shocks, in this case, President Trump’s new tariff measures against China.
Market sentiment hits historic lows
Supporting that thesis, on-chain analyst Axel Adler Jr reported that Bitcoin’s Unified Sentiment Index has dropped into the extreme bearish zone, a level last seen during major cycle bottoms.
The composite index, which merges the Fear & Greed Index, CoinGecko’s retail sentiment data, and a rolling normalization model, now reads close to –80, indicating widespread capitulation and panic across crypto markets.
Adler explained that this sentiment structure mirrors periods from late 2024 when investors were similarly defensive despite relatively stable Bitcoin prices near cycle highs.
“Participation is low and risk appetite is depressed, yet structurally prices remain resilient,” Adler wrote.
Why it matters
Historically, such deeply bearish readings have marked exhaustion phases before recovery. With Bitcoin consolidating near $111,000, technicals and sentiment data now paint a picture of an overextended correction rather than a long-term reversal.
If the market follows previous cycle behavior, a rebound phase could emerge once negative positioning unwinds, aligning with Merlijn’s projection that the current dump is the final shakeout before the next bull leg.
Conclusion
While retail fear dominates and sentiment metrics flash red, analysts see signs of cyclical repetition. The same disbelief that followed the 2020 crash, they suggest, may soon give way to euphoria once again.