A crypto downtrend usually begins after an uptrend reaches its peak. The source places this move inside a broader four-part market cycle: accumulation, uptrend, market top, and downtrend. In the downtrend phase, sellers outnumber buyers, pushing prices to levels many long-term holders did not expect. The article also notes that volatility is often high at the start of a decline, then fades later as apathy and lack of interest take over.
How to tell a correction from a true downtrend
The source says spotting the start of a bear market is difficult because falling prices can still look like a normal correction inside an uptrend. One way to judge the difference is by looking at volume. If prices fall on heavier volume than the volume that carried them up to the same area, that points more clearly to a downtrend.
Another signal is the structure of the rebound. If price bounces after a sharp drop but fails to reclaim the previous uptrend high, forming a lower high, the asset may already be in a broader bearish phase.
The three emotional stages of a decline
The article divides a downtrend into three stages: panic and fear, relief and hope, and capitulation and depression. The first stage tends to appear after market euphoria fades. At the start, many traders assume the drop is only a correction. That denial can last for a while. Once losses keep growing, panic and fear start to dominate.
A strong rebound often follows. Markets do not move in a straight line, and this bounce can revive hopes that prices will return to earlier highs. In a prolonged decline, though, these rallies often turn into nothing more than relief moves. Some holders sell as soon as part or all of their losses are recovered, while fresh demand is not strong enough to absorb that supply. The rebound then fails, and price slides back toward the prior lows. A typical feature here is a rally that tops below the old bull market high.
The last stage is capitulation and depression. After relief rallies fail, selling can become much more aggressive. Investors lose confidence that prices will recover and start exiting at steep losses. The source argues that this behavior is especially common in crypto because the asset class is highly volatile and speculative. This phase often brings the fastest and largest price drops. It even states that Bitcoin, despite being the largest and most established cryptocurrency, can fall by as much as 50% in a single trading day.
Bitcoin examples from 2018 and 2020
The article uses Bitcoin’s 2018 bear market as a case study. After the 2017 bull market peak, Bitcoin fell from $20,000 in December 2017 to $6,000 by February 2018, marking the first leg of the decline. Several relief rallies followed during 2018, but each one failed to break above $10,000 before price slipped back toward $6,000. Then came capitulation: in December 2018, Bitcoin dropped from $6,000 to $3,000 in just two weeks.
A second example is the COVID crash in March 2020. The source says Bitcoin fell from $8,000 to $3,800 in less than 24 hours, completing the second downtrend of the 2018-19 bear market. After these washout moves, the article says markets often enter a depressed period in which prices go flat because most sellers are already out and buyers still lack conviction.
Reading the decline through Elliott Wave A-B-C
Because fear, hope, and depression are subjective, the source recommends a more objective framework for identifying downtrend stages: Elliott Wave theory. Under this approach, a standard downtrend is made up of two moves down and one move up—wave A, wave B, and wave C. Prices fall during A and C, while B is the rebound.
The article says waves A and C often alternate in character. If wave A is fast and violent, wave C may last longer and include more sideways trading. In Bitcoin’s 2018-19 bear market, wave A took only one month as price fell from $20,000 to $6,000. Wave B then bounced strongly to $12,000. Wave C stretched out much longer, included about seven months of sideways action, and ended with the December 2018 drop to $3,000.
The source also points to Bitcoin’s 2021 price action as an example of how wave B can even exceed the previous high and still fail. In that sequence, wave A started in April 2021 with a drop from $65,000 to $29,000. Wave B began after that and climbed from July 2021 to $69,000 in November. Even so, the article says a move above the prior top does not automatically confirm a new uptrend. Volume still matters, especially if wave B rises on lighter volume than wave A, which can signal a bull trap.