Bitcoin at Inflection Point: Bear Market or Bull Reset?

Bitcoin's price action in late 2025 has created a pivotal crossroads for the market. After a dramatic correction from an all-time high of $126,000 to a compressed trading range of $81,000–$91,000, the asset now faces a critical question: Is this the beginning of a prolonged bear market, or a temporary reset setting the stage for a new bull cycle? To answer this, we must dissect the liquidity-driven regime shifts and on-chain signals that define Bitcoin's fragile equilibrium.

Liquidity: The Vanishing Safety Net

Bitcoin's liquidity profile has deteriorated sharply in 2025, exposing systemic vulnerabilities. Short-term holders (STHs), who typically provide liquidity during price swings, now exhibit a loss ratio of just 0.07x-far below historical averages-indicating a collapse in selling pressure from this cohort according to on-chain analysis. This metric, which measures the proportion of STHs selling at a loss, has historically acted as a buffer during downturns. Its current weakness suggests the market lacks a critical layer of demand-side resilience.

Compounding this, Bitcoin's price has remained below the STH cost basis of $104,600 for months, triggering a cascade of forced selling from margin accounts and leveraged positions. Meanwhile, order-book depth across major exchanges has thinned (https://blog.mexc.com/news/bitcoin-poised-for-a-december-move-liquidity-and-on-chain-signals/), amplifying sensitivity to both buy and sell pressure. Market makers, constrained by macro uncertainty and reduced risk appetite, are no longer providing the same level of liquidity, leaving the market prone to sharp, unidirectional moves.

The use of Bitcoin as collateral on lending platforms further exacerbates fragility. Over 50% of posted collateral in DeFi and CeFi ecosystems is now BTC. While this reduces immediate sell pressure by enabling users to access liquidity via loans, it creates a double-edged sword: further price declines could trigger mass liquidations, accelerating downward spirals.

On-Chain Signals: A Market in Waiting

On-chain metrics paint a picture of a market in limbo. The 90-day Spot Taker Cumulative Volume Delta (CVD) has shifted to neutral territory, signaling that aggressive selling has exhausted but buyer conviction remains absent. This neutrality aligns with broader leverage normalization: derivatives funding rates have stabilized, and the balance between long and short positions has reached equilibrium according to on-chain data.

Options positioning in December 2025 reveals defensive positioning. Open interest is heavily concentrated near the $84,000 put strike, with upside capped around $100,000. This suggests market participants are hedging against a near-term breakdown while pricing out the most immediate crash risk (short-term skew at 9.3%). However, the six-month skew has nearly doubled, reflecting growing demand for tail-risk protection as concerns about a 2026 bearish path intensify.

The most telling signal, however, is Bitcoin's beta to macroeconomic forces. In the ETF era, Bitcoin has become a high-beta asset, exhibiting a 5x–9x sensitivity to changes in global liquidity indices. This contrasts sharply with gold and equities, which show lower betas. As a result, Bitcoin's trajectory is now inextricably tied to Federal Reserve policy and global real yields-a shift that could either catalyze explosive growth or deepen its bearish trajectory.

ETF Flows: The Double-Edged Sword

Bitcoin ETFs, which accumulated 515,000 BTC by February 2025, have become a dominant force. Yet November 2025 saw a reversal: a $3.7 billion net redemption coincided with the asset's slide below key cost-basis bands. These redemptions were not merely a function of falling prices but a reflection of liquidity constraints-thin order books made it difficult for ETFs to redeem shares without exacerbating sell pressure.

The irony is that the same ETF structure that once provided a floor for Bitcoin now risks amplifying volatility. If the Fed signals a dovish pivot in December, ETF inflows could overwhelm already fragile liquidity, triggering a rapid upward move. Conversely, a hawkish surprise or macro shock could force further redemptions, accelerating a bearish spiral.

The Path Forward: December as the Tipping Point

December 2025 is shaping up as a make-or-break period. The market's heavy options positioning around $84,000 and $100,000 creates a self-fulfilling prophecy: if Bitcoin breaks below $84,000, the concentrated puts could trigger a cascade of selling. Conversely, a break above $100,000 might unlock dormant demand from ETFs and institutional players.

The key variable will be liquidity. A dovish Fed pivot could unleash a surge in institutional demand, overwhelming thin order books and producing a rapid upward move. However, without a material improvement in liquidity metrics-such as a rebound in STH selling activity or thicker order-book depth-Bitcoin's upside potential remains capped.

Conclusion: Regime Shift or False Dawn?

Bitcoin's current inflection point hinges on whether this is a liquidity-driven bear market or a temporary reset. The collapse of STH liquidity, thin order books, and high macro beta all point to a fragile market. Yet the neutral CVD, stabilized derivatives, and defensive options positioning suggest the worst of the selling pressure may be over.

The answer lies in the coming weeks. If liquidity improves and macro signals align with a dovish Fed, Bitcoin could enter a bull reset. But if systemic fragility persists and redemptions continue, the bear market may yet deepen. For now, the market is in a delicate equilibrium-one that could tip either way with the next macro shock.