Is Bitcoin in a Bear Market or a Bull Market Correction? On-Chain Fundamentals and Market Structure Analysis

The debate over whether Bitcoin is in a bear market or experiencing a bull market correction has intensified in late 2025, as conflicting signals emerge from on-chain data and market structure. While traditional metrics like price action and transaction volume suggest a bearish narrative, other indicators-such as hash rate resilience and miner behavior-hint at a deeper structural shift rather than a cyclical downturn. This analysis synthesizes on-chain fundamentals and market structure to determine whether Bitcoin's current trajectory aligns with a bear market or a temporary correction within a broader bull cycle.

On-Chain Fundamentals: A Market in Transition

Bitcoin's on-chain fundamentals in late 2025 reflect a market grappling with structural challenges. Daily transaction volume has plummeted by over 40% compared to 2024 highs, with the USD value of on-chain settlements falling to just above $7.5 billion from over $14 billion. Similarly, the average number of daily transactions has dropped to below 225,000 from a peak of 325,000, signaling reduced participation from both retail and institutional actors. Transaction fees have also collapsed, averaging under $0.80 per transaction compared to over $5 during the bull market peak.

Miner revenues have followed a similar trajectory, declining to below $20 million per day from peaks near $50 million earlier in the year. This decline has been driven by lower block rewards and negligible transaction fees, forcing higher-cost operations to liquidate Bitcoin reserves to cover expenses. Miner debt has surged from $2.1 billion in Q2 2024 to $12.7 billion in Q2 2025, underscoring the capital-intensive nature of the industry. However, the global hash rate remains at an all-time high, reflecting ongoing investment in mining infrastructure and the network's resilience.

A critical divergence has emerged in miner strategy, with many pivoting to artificial intelligence (AI) and high-performance computing (HPC) to secure stable cash flows through multi-year contracts. This shift suggests miners are adapting to a low-margin Bitcoin environment, leveraging excess energy capacity during periods of low AI demand to reduce reliance on costly backup systems like diesel generators.

Market Structure: Fragile Equilibrium and Accumulation Signals

Bitcoin's price action in 2025 has been marked by volatility, peaking near $109,000 in Q1 before retreating below $90,000 in November. On-chain analysis identifies a fragile range between $81,000 and $91,000, with $95,000–$97,000 acting as immediate resistance. The Short-Term Holder Realized Price (STHRP) currently sits at $113,000, serving as a dynamic support level. Historical MVRV thresholds suggest potential resistance in the $160,000–$200,000 range.

The MVRV ratio, a key valuation metric, has declined after encountering overvalued zones, signaling reduced buying pressure and increased selling activity. Long-term holder behavior also indicates consolidation, with older coin movements and gradual exchange inflows suggesting a shift from panic selling to strategic accumulation. The MVRV Z-Score on a 2-year rolling basis further supports this narrative, indicating Bitcoin is in an accumulation-friendly range.

Exchange flows and large holder activity reinforce the narrative of consolidation. Net inflows to exchanges point to potential selling pressure, while the number of addresses holding at least 1,000 BTC has risen to 1,384-the highest in four months. Meanwhile, the number of small holders (wallets with one BTC or less) has decreased, suggesting larger buyers are absorbing supply.

Whale activity has surged, with over 102,000 transactions exceeding $100,000 and 29,000 transactions above $1 million recorded in a single week-a potential record for 2025. The All Exchanges Whale Ratio (EMA14) has spiked to its highest level in ten months, indicating heightened whale activity on platforms. This trend is particularly concerning in a low-volume environment, where even moderate selling pressure can trigger sharp downside moves.

Valuation Metrics and Liquidity Dynamics

The Network Value to Transactions (NVT) ratio, a critical valuation tool, stands at approximately 35 in early 2025, suggesting Bitcoin is near fair value relative to on-chain activity. However, the NVT ratio's reliability has diminished due to the rise of off-chain trading (e.g., ETFs and futures), which obscures the relationship between network value and on-chain transaction volume.

Liquidity conditions remain fragile, with Bitcoin's on-chain activity and transaction fees at record lows. This fragility is exacerbated by the fact that ETF flows have turned negative in Q4 2025, with spot Bitcoin ETF holders acting as net sellers. The combination of low liquidity and increased whale activity raises the risk of sharp corrections, with analysts anticipating a potential drop toward $90,000 and $88,500.

Contrarian Indicators and Structural Resilience

Despite the bearish signals, several contrarian indicators suggest Bitcoin may be nearing a cyclical inflection point. The network hash rate dropped 4% in mid-December 2025-a historically bullish contrarian signal. Additionally, miner debt and forced selling have created a scenario where further price declines could trigger a rebalancing of supply and demand dynamics.

The shift toward AI and HPC infrastructure also highlights a broader trend of miners monetizing excess energy capacity, reducing reliance on Bitcoin mining for revenue. This structural adaptation could stabilize miner cash flows and mitigate future liquidity crises.

Conclusion: Bear Market or Correction?

The evidence points to a hybrid scenario: Bitcoin is in a bear market characterized by structural challenges, but the market structure and on-chain metrics suggest it is not a traditional bear market. The decline in transaction volume, miner revenues, and whale-driven exchange inflows align with bearish dynamics. However, the resilience of the hash rate, the emergence of AI-driven revenue streams, and accumulation-friendly valuation metrics (e.g., MVRV Z-Score) indicate a deeper structural shift rather than a cyclical downturn.

For investors, the key lies in distinguishing between short-term volatility and long-term fundamentals. While Bitcoin's price may test critical support levels in the near term, the interplay of on-chain resilience and structural innovation suggests the market is not in freefall. Instead, it is navigating a transition phase-a correction within a broader bull cycle, where the next leg higher will likely emerge from a foundation of renewed accumulation and technological adaptation.