The year 2025 was once anticipated to be a "super cycle" year for Bitcoin, fueled by record institutional capital inflows and a favorable policy environment. However, the reality has been markedly different. As we approach the end of the year, the world's largest digital asset is not forging a new paradigm but is instead grappling with performance issues.
The upward momentum has waned, spot prices have declined, and retail investor participation has dwindled as optimistic narratives give way to the stark mathematics of a correction.
On-chain data now reveals what analysts are terming a "bear market," stemming from a structural demand deficit for Bitcoin at prevailing price levels.
The Bear Market Unveiled
The bullish narrative for 2025 didn't collapse in a sudden crash. Instead, it began to falter as investors recognized that the year's highs were more precarious than initially perceived. Bitwise CEO Hunter Horsley suggested that 2025 has been a "masked" bear market, with Bitcoin experiencing bearish conditions since the early months, despite reaching record highs.
"We'll look back at 2025 and realize the market has been in a bear state since February - masked by continuous buying pressure from spot ETFs and Bitcoin Treasury firms," said Horsley.
During the fourth quarter of 2025, U.S. spot Bitcoin ETFs transitioned from net inflows to net outflows, with total holdings decreasing by approximately 24,000 BTC. Key marginal buyers, such as Bitcoin fund management companies, have also slowed or paused their acquisitions.
With these capital flows diminishing, the market is now more reliant on underlying demand, and prices are adjusting to a reality where readily available mechanical buying no longer absorbs every dip.
Data from CryptoQuant confirms this trend. While Bitcoin prices remained relatively stable for a significant portion of the year, even reaching nearly $125,000 in October, the rate of demand growth fell below the trend line, starting in early October.
Alphractal has also noted similar signals, including reduced market interest, lower Wikipedia page views for Bitcoin, and social media activity returning to levels typically seen in bear markets. Retail investors tend to withdraw when price increases are no longer compelling.
Alphractal further warns of the strongest selling pressure since 2022, indicating an environment characterized not only by a lack of new buyers but also by active distribution from existing holders. These sell-offs could potentially set the stage for a bottoming process, but as 2022 demonstrated, they could also lead to an extended period of sideways trading before a clear trend emerges.
Bitcoin Halving: Still Relevant?
The ongoing selling pressure, occurring well into the 2024 halving period that was expected to fuel a sustained upward trajectory, is forcing the market to reconsider its operational mechanics.
CryptoQuant observes that:
"The current decline suggests that Bitcoin's cyclical behavior is primarily dictated by the expansion and contraction of demand growth, rather than by halving events or past price performance. When demand growth peaks and declines, bear markets will emerge regardless of supply factors."
Looking ahead to 2026, two divergent perspectives are emerging: one focused on liquidity and the other on timing. Julien Bittel of Global Macro Investor argues that the four-year cycle is not primarily driven by halving events but is instead a consequence of the "public debt refinancing cycle." According to Bittel, the current "bear market" is not a failure of Bitcoin but a temporary postponement of the macroeconomic cycle.
Conversely, Jurrien Timmer of Fidelity sees signs of a structural end, forecasting that 2026 could be a "pause year" for Bitcoin, with support levels around $65,000–$75,000, aligning with the existing demand void on-chain.
Conditions for Ending the Bear Market
With Bitcoin mired in a "bear market", the immediate reality is that marginal buying power has failed. Analysts have identified four key conditions that must be met to confirm the end of the bear market:
- Stable ETF Flows: Spot ETFs must transition from net selling to consistent net buying to absorb the current distribution volume.
- Demand Growth Returns to Trend: CryptoQuant data must indicate renewed buying interest rather than ongoing distribution.
- Funding Rate Recovery: A sustained recovery indicates that traders are willing to pay to maintain long positions, a hallmark of bull markets.
- Structural Price Recovery: Bitcoin sustaining above its 365-day moving average would be the clearest confirmation of a transition to an accumulation phase.
Until these signals turn positive, Bitcoin will likely remain trapped in a mature and corrective market phase.
Galaxy Digital has lowered its year-end price target for Bitcoin to $120,000.
Galaxy Digital suggests 2026 may be the most unpredictable year yet for Bitcoin.
Key Factors and Indicators:
| Factor | Indicator |
|---|---|
| ETF Flows | Transition from net outflows to sustained net inflows |
| Demand Growth | Return to trend line, indicating renewed buying interest |
| Funding Rates | Sustained positive funding rates, reflecting trader confidence |
| Price Action | Sustaining above the 365-day moving average, signaling accumulation |
| Bitcoin on-chain data | Demand Growth, supply and demand analysis |
| Bitcoin price | Sustaining above the 365-day moving average, signaling accumulation, price stability |
| on-chain data | Demand Growth, supply and demand analysis |
FAQs
What does Bitcoin on-chain data suggest about the current market conditions and Bitcoin price?
Bitcoin on-chain data indicates a "demand void," suggesting a structural deficit in demand at current price levels, which is contributing to downward pressure on the price of Bitcoin. Analysts are terming this a "bear market" masked by earlier buying pressure.
How have Bitcoin ETFs impacted the on-chain data and Bitcoin price recently?
U.S. spot Bitcoin ETFs have shifted from net inflows to net outflows, reducing buying pressure. This change, along with slowed acquisitions from other key buyers, has made the market more reliant on underlying demand, leading to price adjustments as readily available buying no longer absorbs every dip.
What does the Bitcoin on-chain data reveal about retail investor behavior and its impact?
The Bitcoin on-chain data shows reduced market interest and social media activity, signaling a return to bear market levels. Retail investors tend to withdraw when price increases are no longer compelling, further contributing to the "demand void" and selling pressure.
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