Is Bitcoin's Recent Support Breakdown a Bear Market Signal or a Classic Fakeout?

Bitcoin’s recent breakdown below the $110,000 support level in late August 2025 has ignited a heated debate among traders and analysts. Is this a harbinger of a prolonged bear market, or a temporary “fakeout” that will pave the way for a stronger rally? To answer this, we must dissect the technical and on-chain signals, compare them to historical precedents, and weigh the broader macroeconomic context.

Technical Indicators: Bearish Divergence and Institutional Signals

The immediate technical picture is grim. Bitcoin is trading within a descending channel on the 4-hour chart, with key support levels at $110,000–$112,000 and resistance near $113,600 [1]. A breakdown below $107,000 would signal a deeper bearish phase, potentially testing the $100,000 psychological level [1]. The RSI has entered oversold territory at 34.50, while the MACD shows an extremely bearish crossover [4]. These indicators suggest short-term selling pressure, but oversold conditions alone do not guarantee a rebound—a lesson from the 2018–2022 bear market, where Bitcoin fell 77% despite similar RSI readings [1].

The 200-day moving average (SMA) at $101,000 has flipped from support to resistance, a critical shift historically associated with bear market confirmations [5]. If Bitcoin breaks below this level, it could trigger a cascade of stop-loss orders and force institutional players to reassess their positions. However, the NVT ratio (Network Value to Transactions) at 1.51 suggests Bitcoin’s valuation is increasingly driven by utility and macroeconomic factors rather than speculative trading volume [1]. This divergence between technical weakness and fundamental strength complicates the bearish narrative.

Historical Parallels: Lessons from Past Breakdowns

Bitcoin’s history is littered with support breakdowns that either signaled bear markets or proved to be temporary corrections. For example, the 2013 and 2017 breakdowns were followed by over 70% declines [2]. In 2021, a similar breakdown below $42,000 was initially seen as a bearish signal but turned out to be a fakeout, with Bitcoin rebounding to $69,000 within months [3]. The key difference today is the institutionalization of Bitcoin. ETF approvals and corporate holdings (e.g., Tesla and Harvard) have reduced retail-driven volatility by 75%, creating a more stable price structure [1].

The 200-week moving average (200WMA) at $50,000 is another historical benchmark. During the 2018–2022 bear market, Bitcoin found a floor at this level before recovering [4]. If the current breakdown leads to a test of the 200WMA, it could either confirm a bear market or act as a buying opportunity for long-term investors.

On-Chain Metrics: A Mixed Bag

On-chain data adds nuance to the analysis. The MVRV (Market Value to Realized Value) ratio has compressed to 1.0, indicating a transitional phase where speculative and long-term investor sentiment are rebalancing [2]. This compression historically precedes corrections but does not necessarily signal a collapse. Meanwhile, the Value Days Destroyed (VDD) Multiple entering the “green zone” suggests institutional accumulation at lower price levels [1].

However, the Bitcoin Bull Score at 20—a historically bearish level—and the MVRV Z-Score in the red zone (1.43) highlight overvaluation risks [3]. Active address counts have also declined, signaling reduced retail participation, while large holders (whales) are repositioning their holdings [5]. This divergence between retail and institutional behavior mirrors the 2021–2022 bear market, where weak hands were shaken out before a recovery [1].

The Fakeout Debate: Short-Term Pain vs. Long-Term Gain

The critical question is whether this breakdown is a genuine bear market confirmation or a classic fakeout. A breakout occurs when price decisively moves above resistance or below support with strong volume and candle closures [4]. A fakeout, by contrast, sees price briefly break a level before reversing. Bitcoin’s current breakdown lacks the volume and conviction of a true breakout, with the BTC Taker Buy Sell Ratio at 0.96 indicating more sell volume than buy volume [5].

Historical fakeouts, such as Bitcoin’s 2021 dip below $42,000, were followed by rapid rebounds. If Bitcoin stabilizes above $105,000, it could retest the $113,500 resistance level, validating a bullish flag pattern [6]. Conversely, a breakdown below $100,000 would likely trigger a deeper correction toward $95,000–$100,000 [5].

Conclusion: A Tenuous Equilibrium

Bitcoin’s current price action reflects a tug-of-war between short-term bearish momentum and long-term institutional confidence. While technical indicators and historical parallels suggest a bearish bias, on-chain metrics and macroeconomic factors (e.g., ETF adoption) provide a counterweight. Investors should monitor key levels: $105,000 for a potential rebound, $100,000 for a deeper correction, and $113,500 for a bullish retest.

In the end, Bitcoin’s trajectory will depend on whether institutional buyers absorb discounted supply at lower levels or if the market succumbs to a wave of panic selling. For now, the answer remains unresolved—a classic case of market indecision that could tip either way.

Source:
[1] Bitcoin Price Analysis Today: Key Resistance at $113.6K Looms
[2] Bitcoin's MVRV Compression and Market Consolidation
[3] Bitcoin's Short-Term Volatility and Strategic Entry Points
[4] Bitcoin's Trendline Break: Bear Market Start or Smart Money Play?
[5] Bitcoin drops under $109K: How low can BTC price go?
[6] Bitcoin's Critical Support Levels: A Make-or-Break Moment