Is Bitcoin Already in a Bear Market?

The question of whether Bitcoin has entered a bear market in 2025 is no longer speculative-it is a matter of interpreting the signals embedded in on-chain data and macroeconomic trends. As the cryptocurrency's market cycle matures, a confluence of distribution dynamics, institutional behavior, and macroeconomic shifts suggests a bearish phase is underway, even as structural bullish fundamentals persist.

On-Chain Signals: A Market in Distribution

Bitcoin's on-chain metrics in late 2025 paint a picture of a market transitioning from accumulation to distribution. Long-term holders (LTHs)-addresses holding Bitcoin for over 155 days-have begun offloading their holdings at historically high prices, a behavior consistent with late-cycle profit-taking. This activity has introduced approximately $300 billion in dormant supply into the market, creating downward pressure on price. Meanwhile, 74% of circulating BTC is now illiquid, with 75% of coins dormant for over six months. These figures underscore a hoarding sentiment that, while bullish in the long term, has created a structural deficit in immediate demand.

The U.S. spot Bitcoin ETFs, once a pillar of institutional demand, have shifted to net redemptions in Q4 2025, reducing holdings by 24,000 BTC (approximately $2.12 billion). This reversal, coupled with sub-trend growth in addresses holding 100-1,000 BTC (often linked to ETFs and corporate treasuries), mirrors pre-2022 bear market patterns. Additionally, overhead supply and overhead losses-6.7 million BTC held at a loss and 360k BTC attributed to loss sellers-highlight bearish pressure.

Despite these challenges, on-chain valuation models like the Network Value to Transaction (NVT) ratio and the Stock-to-Flow (S2F) model still signal healthy bull dynamics. This duality-distribution at high prices coexisting with structural bullishness-reflects a market in consolidation rather than outright collapse.

Macroeconomic Context: A Shifting Risk Appetite

Bitcoin's price action in 2025 has diverged from its traditional role as an inflation hedge. While the Federal Reserve's rate cuts in late 2025 failed to catalyze a significant rally, the asset's correlation with the S&P 500 (0.6) and gold (0.5) has strengthened. This suggests Bitcoin is behaving more like a high-beta technology stock than a safe-haven asset, a shift driven by institutional adoption and macroeconomic uncertainty.

Historical data reveals a strong positive correlation (0.8) between Bitcoin and inflation, yet 2025's 3% inflation rate did not translate into sustained price gains. Instead, Bitcoin's movements have been more closely tied to risk appetite and broader market sentiment, particularly as ETF launches and regulatory clarity drove record highs earlier in the year. The Fed's policy normalization, however, has curtailed speculative flows, exacerbating the bearish tilt.

Implications for Investors

For Bitcoin to re-enter a bull phase, several conditions must align. First, ETF inflows must stabilize, and demand growth must return to trend lines. Second, price must sustainably exceed the 365-day moving average, a technical threshold that has historically signaled bullish momentum. Third, institutional accumulation must resume, countering the $300 billion in dormant supply now active in the market.

Analysts caution that without these catalysts, Bitcoin could face a deeper correction. Support levels at $70,000 and a potential cycle low of $56,000 have been identified, though the 74% illiquid supply may provide a floor for long-term holders unwilling to sell at losses.

Conclusion

Bitcoin's market in late 2025 is best characterized as a mature cycle in distribution, with on-chain and macroeconomic signals confirming a bearish phase. While structural bullishness remains intact-evidenced by hoarding behavior and healthy valuation models-the immediate outlook is constrained by ETF outflows, overhead supply, and shifting macroeconomic dynamics. For investors, the path forward hinges on renewed demand absorption and alignment of institutional and retail sentiment. Until then, the market will likely oscillate between consolidation and correction, awaiting the next catalyst to reignite a bull run.