Bitcoin Warning: On-Chain Data Signals Price Drop Risk

Bitcoin Bear Market Warning: On-Chain Data Signals Increased Price Drop Risk

2025 was widely anticipated as a pivotal year for Bitcoin, touted as the beginning of a “supercycle” fueled by unprecedented institutional investment and a more favorable regulatory landscape in Washington. However, as the year draws to a close, the reality is starkly different. Instead of a new paradigm, Bitcoin is navigating a challenging performance period. The initial rally has faded, spot prices are declining, and retail participation has waned, coinciding with a shift in narrative support and the inevitable arithmetic of a market correction. This has led analysts to point to a concerning trend: on-chain data now strongly suggests a deepening “bear season” driven by a fundamental shortfall in demand at current price levels.

The Unraveling of the 2025 Bull Narrative

The optimistic 2025 bull market narrative didn’t collapse with a dramatic crash, but rather with a growing realization that the year’s highs were unsustainable. Bitwise CEO Hunter Horsley has cautioned investors, arguing that Bitcoin has been in a “bear season” since early 2025, despite reaching record prices. He believes that 2025 will ultimately be viewed as a bear market in disguise, masked by consistent buying pressure from Data-as-a-Service (DATs) and Bitcoin Treasury Companies.

According to Horsley: “We will look back on 2025 and realize that it's been a bear market since February — masked by the relentless bid from DATs and Bitcoin Treasury Companies.”

Spot ETF Redemptions and Diminishing Institutional Demand

A key indicator of this shift is the performance of US spot Bitcoin ETFs. In the fourth quarter of 2025, these ETFs transitioned from net accumulation to net redemptions, with aggregate holdings decreasing by approximately 24,000 BTC. This reversal signals a significant cooling of institutional interest and a reduction in buying pressure.

Furthermore, major marginal buyers, such as Bitcoin treasury companies, have slowed or paused their purchases. With this consistent flow of capital receding, the market is now more accurately reflecting underlying demand, and prices are adjusting to a reality where readily available buying support is diminishing.

On-Chain Data Confirms a Bearish Trend

Data from CryptoQuant corroborates this assessment. While Bitcoin’s price remained relatively firm throughout much of the year, peaking near $125,000 in October, demand growth began to slip below its established trend line as early as October. This suggests that the market had largely exhausted its buying power during the initial surge driven by the US spot ETF launch and post-election positioning, rather than experiencing a broad and sustainable expansion in demand.

This observation is further supported by metrics from Alphractal, which indicate a decline in market attention. Search interest for Bitcoin has decreased, Wikipedia page views are lower, and social media activity has fallen back to levels typically associated with bear markets.

This pattern is familiar: retail investors tend to chase rising prices but retreat when an asset enters a period of stagnation or decline. Simultaneously, Alphractal has identified the strongest bout of selling pressure since 2022, indicating an environment characterized not only by a lack of new buyers but also by active distribution from existing holders.

Such episodes can precede a market bottom, but the experience of 2022 also demonstrated that they can lead to prolonged periods of sideways trading before any clear upward trend emerges.

Is the Bitcoin Halving Thesis Still Valid?

The persistent selling pressure, occurring within the timeframe when the 2024 halving was expected to deliver sustained upward momentum, has prompted a fundamental reassessment of the market’s driving forces. CryptoQuant notes: “The current downturn reinforces that Bitcoin’s cyclical behavior is governed primarily by expansions and contractions in demand growth, not by the halving event itself or past price performance. When demand growth peaks and rolls over, bear markets tend to follow regardless of supply-side dynamics.”

Conflicting Roadmaps for 2026

This has led to two contrasting perspectives for 2026, dividing market strategists into opposing camps: those focused on liquidity and those focused on time.

Julien Bittel, Head of Macro Research at Global Macro Investor, argues that the four-year cycle is not directly tied to the halving event. In a note to clients, he posits that Bitcoin’s rhythm is a derivative of the “public debt refinancing cycle.” He believes the current “bear season” is not a failure of the asset itself, but a temporary delay in the macro cycle, caused by the postponement of the debt maturity wall post-COVID.

Bittel wrote: “In our view, the 4-year cycle is now officially broken because the weighted average maturity of the debt term structure has increased.” If his analysis is correct, the current sideways movement is a temporary pause before the Federal Reserve and Treasury are compelled to inject liquidity to manage debt obligations, potentially extending the cycle well into 2026.

However, Jurrien Timmer, Director of Global Macro at Fidelity, presents a more pessimistic timeline governed by the passage of time. He states: “My concern is that Bitcoin may well have ended another 4-year cycle halving phase, both in price and time.”

Visually comparing past bull markets, Timmer suggests that the October high aligns with the historical profile of a blow-off top. Unlike Bittel, who anticipates a liquidity-driven recovery, Timmer foresees a structural end to the cycle. He believes 2026 could be a “year off” for Bitcoin, with support levels potentially falling between $65,000 and $75,000 – a range that aligns uncomfortably with the current demand vacuum observed on-chain.

What Needs to Change to End the Bear Market?

Based on the current analysis, Bitcoin is demonstrably in a bear season. Whether the market awaits Bittel’s liquidity injection or endures Timmer’s time-based capitulation, the immediate reality is the failure of the marginal bid. To reverse this trend, Bitcoin requires structural repair. Analysts identify four key shifts that would signal a credible exit from bear territory:

• ETF Flows Must Stabilize: A return to steady net buying in spot ETFs is crucial to absorb the distribution flagged by Alphractal.
• Demand Growth Must Reclaim Trend: CryptoQuant’s demand indicators need to demonstrate fresh incremental buying, rather than the current redistribution of existing holdings.
• Funding Rates Need to Recover: A sustained recovery in perpetual funding rates would indicate renewed willingness among traders to hold long positions – a hallmark of bull markets.
• Price Must Reclaim Structure: Bitcoin reclaiming and holding above its 365-day moving average would provide the most definitive market confirmation of a shift back towards accumulation.

Until these signals turn positive, Bitcoin will remain caught in the crosscurrents of a maturing market.

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