The crypto market has recovered for most of 2025, but signs of exhaustion are starting to appear. According to on-chain analyst Willy Woo, market conditions now resemble previous late-cycle phases that led to major pullbacks. He says another 80% correction in Bitcoin’s price remains likely, not because of weak fundamentals, but because of declining global liquidity.
Every market cycle exposes structural weaknesses. The last recession from 2022 to 2023 was one of the worst in the industry’s history. It started with the collapse of Terra’s Luna ecosystem, which wiped out more than $40 billion in value and set off a series of failures that spread across the market.
When the dominoes fell
After Luna collapsed, companies like Celsius and Three Arrows Capital fell apart. Their losses trickled down to lenders, market makers and exchanges. Genesis, Alameda Research, and eventually FTX followed, creating an almost systemic failure. Billions of dollars in customer funds disappeared and the industry spent more than a year rebuilding the wreckage.
Today the system is stronger. Foreign exchange reserves are more transparent, regulators are more active and spot ETFs have shifted liquidity to regulated markets. Risky leverage is less common. But a more solid structure does not make crypto immune. Bitcoin remains tied to global liquidity flows, and when these weaken, even the strongest fundamentals are tested.
Liquidity still rules the market
Woo’s Analysis Centers on liquidity as the main force behind every major price cycle. During the Federal Reserve’s tightening phase between 2022 and 2023, global liquidity shrank and Bitcoin lost approximately 77% of its value. The same relationship, he argues, still applies today.
Liquidity acts as the oxygen of the market. When the economy expands, prices easily rise. When it shrinks, the entire risk curve deflates. Bitcoin, which is furthest along that curve, always reacts first and hardest. While traditional markets can fall by a third during recessions, Bitcoin and altcoins often lose 70 to 80% as speculation diminishes.
Liquidity models flash red
Woo’s macrocycle risk model shows that market prices are once again expanding well above their liquidity base. When risk levels rise and real inflows weaken, the market is supported more by momentum than capital – a fragile state that has historically preceded sharp reversals.
Its liquidity index paints the same picture. The last time the economy fell below a critical threshold was before the peaks of 2017 and 2021, both followed by declines of more than 70%. Bitcoin has now slipped below that limit again. At the same time, the Federal Reserve’s liquidity injections are waning, leaving less of the cash that once supported the rally. Prices remain high, but the capital behind them weakens.
In conclusion, stronger plumbing can slow deterioration, but it cannot defy gravity. The market may be better able to survive the next crash, but it will still have to fall before it finds its next base. At the time of writing, Bitcoin is trading above $122,000 and has entered the green zone.
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