Bitcoin Enters ‘Psychological Torture’ Phase After Trump Tariff Shock

The current market phase is part of a six-stage cycle driven by liquidity, leverage, and recurring investor psychology, as outlined by Doctor Profit. The cycle began with Stage 1, a period of euphoria during Bitcoin’s rally between $115,000 and $125,000. This phase was marked by extreme buying appetite, aggressive leverage, and a widespread belief that downside risk had vanished. Such sentiment typically masks underlying market fragility and ends with sideways consolidation or brief upside spikes, setting the stage for a reversal.

Stage 2 commenced when Bitcoin broke below the psychologically critical $100,000 level. This fast and deliberate move triggered immediate stress among short-term and leveraged traders, designed to limit their reaction time. The analysis points to the sharp crash on October 10 as a defining example of this stage, an event that produced the largest liquidation event in crypto history within hours, underscoring the violent shift in market dynamics.

Stage 3 followed as the fastest and most severe phase, confirming a bear market with an extreme 38% drawdown from the all-time high. Doctor Profit describes this as the most brutal stage, characterized by panic and depression as investors were unable to hedge or de-risk in time. This ‘mechanical repricing’ was devastating, erasing 50% of Bitcoin’s market capitalization in a short period.

The analyst now places the market in Stage 4, a long, sideways period defined by low volatility but high psychological stress. Unlike the violent moves of prior stages, this phase is exhausting. Price is expected to move within a defined range, allowing market makers to generate liquidity on both sides while gradually wearing down participants. Doctor Profit characterizes this as a ‘weak-hands selling zone,’ where frustration, regret, and anxiety dominate. It is here that most short-term holder capitulation occurs, as retail investors exit at a loss after missing earlier selling opportunities.

Looking forward, Doctor Profit explains that a breakdown into Stage 5—the full capitulation phase—is more likely to occur in a few months rather than imminently, though short-term bounces within the $57,000-$60,000 range remain possible. Stage 5 is projected as the most emotional phase, often associated with systemic stress or black swan events. Revised downside targets for this capitulation are now between $35,000 and $45,000, reflecting broader macro and liquidity concerns.

The final Stage 6 would involve stabilization and a structural reversal. In this phase, selling pressure fades as large players accumulate assets while retail investors, anticipating even lower prices, remain on the sidelines. Doctor Profit concluded that while the fastest downside move may be over, the most damaging psychological phase has begun, a pattern consistent with previous Bitcoin cycles. The recent volatility induced by Trump’s tariff proposal adds another layer of macro uncertainty, potentially exacerbating the emotional strain characteristic of Stage 4.