Bitcoin holders have just come through one of the most punishing drawdowns of the cycle. After a 36% drop from recent highs, most short-term traders capitulated, exchanges saw a wave of forced selling, and sentiment collapsed to its lowest point in months. Yet according to market analyst Merlijn The Trader, those who stayed through the wipeout may now be entering what he calls “legend territory.”
Three Major Dumps, One Repeating Pattern
The chart shared by Merlijn shows something critical: this 36% crash is not unusual. Bitcoin has already endured similar breakdowns in the current cycle, a 34% correction in 2024 and a 31% drop earlier in 2025. Each of those violent sell-offs reset momentum, forced weak hands out of the market, and ultimately created the foundation for the next major leg higher.
This latest correction has retraced even deeper, but it fits perfectly into Bitcoin’s long-term rhythm of higher highs followed by brutal flushes. Historically, these structures have acted as cycle springboards, sharp resets that clear excess leverage and set the stage for aggressive rebounds.
Stoch RSI Signals a Cycle Bottom
At the bottom of the chart, the Stochastic RSI indicator tells its own story. Every time the Stoch RSI collapsed into the green accumulation zone, Bitcoin was forming a macro bottom. It happened throughout 2022. It happened during the mid-cycle reset of 2024. It happened again after the 31% sell-off in early 2025.
And now, after this 36% wipeout, the Stoch RSI is once again bottoming.
This matters because the indicator isn’t just showing oversold conditions, it’s flashing the same structure seen before major trend reversals. According to the chart, this zone historically marks the period when disciplined DCA buyers quietly accumulate, while emotional traders exit at the worst possible time.
Fear Is Bottoming Too
Beyond technicals, sentiment is showing classic late-stage capitulation behavior. Funding rates flipped negative. Perpetual swap open interest collapsed. Retail activity dried up. Search trends for Bitcoin turned downward. The exhaustion is visible on-chain as well, with long-term holders adding to their positions while short-term holders panic sell.
This emotional reset is part of why Merlijn says “history rewards the patient.” Market bottoms don’t form on excitement, they form when confidence disappears and only conviction remains.
Why the Pain May Have Just Created the Next Big Setup
Bitcoin’s last two major shakeouts were followed by explosive trend continuation. This structure, dump, sideways stabilization, Stoch RSI reset, perfectly matches the beginning of previous recovery legs. The chart highlights this relationship: red boxes mark the wipeouts, green boxes mark the accumulation zones, and each transition eventually led to a breakout.
Today, the same scenario is unfolding again. And for long-term investors, this is the moment when cycles tend to offer their biggest opportunities. Many exited out of fear. A smaller group is preparing to use this phase the way historical winners always have, by positioning before momentum returns.
The Cycle’s Message
Bitcoin has punished everyone who relied on sentiment. It has rewarded everyone who relied on structure. This 36% pullback is not an anomaly. It’s part of the pattern that has defined the entire cycle. And if history continues to rhyme, those who stayed through the wipeout may soon discover that surviving the fear is what earns the next wave of upside.
In every cycle, only a minority holds through the chaos. That minority, once again, may be standing exactly where the next breakout begins.