Bitcoin's Deepening Liquidity Crisis and the Impending Bear Market: A Short-Term Holder and Macroeconomic Analysis

The Bitcoin market in Q3 2025 has entered a critical juncture, marked by a confluence of deteriorating liquidity conditions and volatile short-term holder (STH) behavior. These dynamics, compounded by macroeconomic headwinds, suggest a deepening bearish trend that could extend into 2026.

Short-Term Holder Behavior: A Harbinger of Weakness

Short-term holders have become a focal point of concern, with their actions reflecting a market in distress. The STH Realized Profit/Loss Ratio in Q3 2025, signaling that investors are increasingly exiting positions at a loss. This metric, a key indicator of market health, has historically correlated with bear market bottoms. For context, a similar collapse in the ratio occurred , preceding a prolonged trading range that lasted over 18 months.

The liquidity implications are stark. Elevated realized losses among STHs have eroded demand, . This range-bound behavior mirrors the stagnation seen in early 2022, when STH activity similarly signaled a lack of conviction among retail and speculative investors. Meanwhile, large clusters of liquidity have emerged , raising questions about artificial price manipulation by institutional players. These clusters suggest that while short-term holders are struggling, larger actors may be exploiting fragmented liquidity to orchestrate directional moves.

### Macroeconomic Triggers: Liquidity Expansion vs. Crypto Stagnation On the macroeconomic front, global liquidity trends have diverged sharply from Bitcoin's performance. Global M2 supply surged to record highs , driven primarily by China's aggressive monetary expansion. Yet, this liquidity surge has failed to translate into a meaningful rebound for Bitcoin or the broader crypto market, . This disconnect highlights a growing skepticism among traditional investors, who are increasingly allocating capital to stablecoins and tokenized assets instead of riskier crypto assets like Bitcoin.

The regulatory landscape further exacerbates the bearish outlook. The passage of the GENIUS Act in July 2025, while intended to legitimize stablecoins, has inadvertently diverted institutional capital away from Bitcoin. , outperforming traditional payment networks like Visa in terms of settled value. This shift underscores a structural reallocation of capital toward perceived "safe havens" within crypto, leaving Bitcoin to grapple with a liquidity vacuum.

The Path Forward: A Bear Market Imminent?

The interplay of STH behavior and macroeconomic trends paints a grim picture. With short-term holders increasingly net sellers and global liquidity failing to support Bitcoin's price, the market is primed for a deeper correction. Historical parallels to Q1 2022 suggest that Bitcoin could remain range-bound for months, if not years, until a new equilibrium is reached. Additionally, the presence of artificial liquidity clusters at higher price levels raises the risk of sudden downward spikes if large players unwind positions.

Investors should brace for a bear market that extends beyond 2025, driven by both technical exhaustion among STHs and macroeconomic dislocation. While the long-term case for Bitcoin remains intact, the immediate outlook is clouded by liquidity fragility and a lack of broad-based demand.