The best explanation for what Bill observed is:
The water bottle crumpled as a result of the volume shrinking with the decrease in temperature.
This is because when the sealed bottle was heated, the air inside expanded due to the temperature increase. However, when the bottle was suddenly placed in the cold water, the temperature of the air inside decreased rapidly, causing the air to contract and create a lower pressure inside the bottle. This difference in pressure between the outside and inside of the bottle would lead to the bottle being crumpled.