For now, the chances of a 2022-style bear market cannot be completely ruled out.
Technically, Bitcoin is already down more than 16%, and the market is only halfway through the second quarter. That said, the current price action still looks very different from what unfolded in 2022.
Despite the recent wave of FUD, BTC continues to rise over 7% this quarter, compared to the brutal 56% decline recorded in Q2 2022.
Analysts within the CoinMarketCap community also support this view. They argue that the market is taking Bitcoin’s recent 40% underwater supply out of context.
According to one analyst, a large portion of these underwater positions are owned by investors who entered through US Spot Bitcoin ETFs at an average cost of around $83,400.
However, recent macroeconomic pressures, including persistent inflation, have forced many of these investors into unrealized losses. More importantly, long-term holders are behaving very differently than in 2022.
According to the analystsSupply from long-term holders has risen to a record 15.8 million BTC, indicating strong conviction despite the pullback.
Instead of selling into weakness, many continue to accumulate, indicating that institutional selling pressure is weighing on Bitcoin [BTC] more than any widespread decline in confidence.
This makes for a marked difference from the bear market of 2022. At the time, confidence in the crypto sector was steadily eroding, leading to widespread selling from both short- and long-term holders.
The real question now is whether this condemnation can continue for the rest of 2026.
Bitcoin’s 2022 divergence faces a new test
As previously discussed, conviction remains the key factor separating Bitcoin from the 2022 bear market.
For context, Bitcoin ended 2022 down about 65%, capping off one of the most painful years in the asset’s history.
While a repeat of that cycle still seems unlikely, recent market developments have brought the bear market debate back into focus and tested that belief once again.
Much of Bitcoin’s resilience in recent months has come from expectations of more crypto-friendly regulation. However, that narrative took a hit after the SEC revoked the “innovation exemption” for tokenized stocks.
In response, the prediction markets sharply lowered the odds that the CLARITY Act would become law, with the probability dropping from a peak of 75% to around 56%.
Making matters worse, Senator Cynthia Lummis recently warned that if lawmakers miss this legislative window, the bill may not resurface until 2030.
For a market that has heavily priced in regulatory progress, such a delay could further strain investor conviction. In the meantime, The uncertainty surrounding interest rate cuts continues.
With both the macroeconomic and regulatory tailwinds looking less certain than they did a few months ago, it may be too optimistic to expect long-term shareholder conviction to remain intact for the rest of the year.
As that belief begins to crack, comparisons to 2022 may become harder to ignore.
Final summary
- Bitcoin’s 40% underwater supply does not automatically indicate a 2022-style bear market as long-term holders continue to accumulate rather than sell.
- However, weaker regulatory hopes and persistent macro uncertainty may weigh on investor conviction.