Analyst warns Bitcoin nearing Phase 2 bear market as volatility and liquidity trends point to further downside risk across 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-stage downturn.
The forecast challenges persistent bullish narratives, suggesting the worst may be ahead for the world’s largest cryptocurrency.
Phase 1 Nears Its End as Volatility Spells Trouble
In a series of posts on X on February 18, Woo outlined a three-phase bear market framework, positioning Bitcoin at a crucial juncture. According to him, the first stage of the current bear market started in the third quarter of 2025 when liquidity first broke down, and the price started to follow.
He explained that the key signal comes from volatility metrics used by quantitative analysts, with Bitcoin entering a prolonged decline when volatility spiked upward. That volatility is still climbing, indicating the bear trend is gaining ground.
“In this phase, perma bulls will blindly say it’s a correction inside a broader bull market but will not give you any hard evidence of capital flowing in,” Woo wrote.
The analyst added that his internal liquidity models, released weekly to investors, currently match the volatility signals. In his opinion, the second part of the bear market will kick in when global equities begin to weaken.
He argued that the largest cryptocurrency often reacts faster than equities when capital exits markets because of its smaller size and higher sensitivity to liquidity shifts.
“Under this bear market framework, BTC is presently in Phase 1 and close to Phase 2,” stated Woo.
He characterized the final episode as “the light at the end of the tunnel,” predicting a turnaround in liquidity, with capital outflows hitting a high point before stabilizing. However, he warned that there could be one more price capitulation just before or immediately after the peak outflows.
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Cycle Indicators Show Mixed Signals for Long-Term Outlook
Not all analysts are interpreting the data as outright bearish. In a recent post, Axel Adler Jr. wrote that Bitcoin’s Entity-Adjusted Liveliness metric peaked in December 2025 and has started declining, a pattern seen in past accumulation periods lasting between 1.1 and 2.5 years. The indicator tracks BTC movement relative to holding time and tends to fall after distribution periods end.
Another perspective from GugaOnChain focused on valuation. Using the MVRV Z-Score developed by Murad Mahmudov and David Puell, the analyst said the current reading near 0.48 places Bitcoin close to historical accumulation zones rather than overheated territory. That suggests some investors may see current prices as discounted compared with average acquisition costs.
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