Bitcoin's Shifting Cycle: Demand Exhaustion and the Onset of a Bear Market

Bitcoin's four-year cycle has long been a focal point for investors and analysts, with on-chain metrics serving as critical barometers of market health. As we approach the end of 2025, the data paints a stark picture: demand exhaustion is accelerating, and the onset of a bear market appears increasingly likely. This analysis unpacks the on-chain dynamics driving this shift, drawing from recent trends in active addresses, NUPL, MVRV, miner behavior, and historical parallels.

1. Active Addresses: A Barometer of Network Participation

The 7-day moving average of Bitcoin's active addresses has plummeted to 660,000, the lowest level since December 2023 according to on-chain data. This decline signals a sharp reduction in network participation, a hallmark of bearish sentiment. Historically, active addresses have surged during bull markets (e.g., 2023-2024) and collapsed during bear markets (e.g., 2022). The current level mirrors those seen in late 2019 and early 2020, periods that preceded prolonged corrections according to data.

Retail participation, a key driver of Bitcoin's price action, is now waning. New addresses are declining by 1% monthly according to ChainCheck, and UTXO age bands reveal increased movement among medium-term holders (1-5 years), with balances in the 1-2 year and 2-3 year cohorts dropping sharply according to ChainCheck. This suggests profit-taking or forced selling by investors who bought during the 2023-2024 bull run.

2. NUPL and MVRV: Bearish Sentiment and Undervaluation

The Net Unrealized Profit/Loss (NUPL) indicator shows that a significant portion of Bitcoin holders are sitting on losses according to BGEometrics. This creates immediate selling pressure as investors seek to cut losses. Meanwhile, the Market Value to Realized Value (MVRV) ratio has fallen below 1, indicating that Bitcoin's market value is now lower than its realized value according to BGEometrics. Historically, this has signaled undervaluation and potential buying opportunities once the price stabilizes. However, the current bearish environment may prolong this correction.

3. Miner Revenue and Transaction Fees: A Struggling Industry

Bitcoin miners are facing unprecedented financial strain. Miner revenue has dropped from $50 million in Q3 2025 to $40 million by late 2025 according to MEXC, with average production costs (including depreciation) reaching $137,800 per bitcoin according to CoinShares. Transaction fees, which once provided a buffer for miners, now account for less than 1% of total block rewards according to CoinShares. This forces miners to sell more Bitcoin to cover operational costs, exacerbating downward price pressure.

The Puell Multiple, a metric that compares mining revenue to historical norms, shows miners operating at significantly reduced margins according to Vaneck. For S19 XP ASICs, breakeven electricity costs have fallen to $0.077/kWh in December 2025, a 36% decline from December 2024 according to Vaneck. While this reflects efficiency gains, it also underscores the industry's fragility in a low-price environment.

4. UTXO Age Bands and Reserve Risk: Investor Behavior and Confidence

UTXO age bands reveal a mixed picture. Long-term holders (>5 years) remain stable, suggesting institutional or whale-level confidence according to Vaneck. However, medium-term holders (1-5 years) are increasingly liquidating, indicating capitulation among retail and speculative investors.

The Reserve Risk metric, which measures long-term holder confidence relative to price, also points to a bearish outlook according to Bitcoin Magazine Pro. While this indicator historically identifies attractive risk/reward opportunities, its current trajectory suggests that holders are prioritizing liquidity over accumulation. This dynamic is consistent with previous bear markets, such as 2018 and 2022, where Reserve Risk dipped sharply before price bottoms.

5. Historical Parallels: Lessons from Past Cycles

Bitcoin's 2017-2020 and 2020-2024 cycles offer instructive parallels. During the 2021 bear market, the Puell Multiple hit historic lows, signaling miner capitulation according to CoinMarketCap. Similarly, the current decline in active addresses and miner revenue mirrors 2018's bear market, where network participation collapsed ahead of a prolonged price slump according to MEXC.

The 2024 halving (April 19, 2024) further complicates the narrative. While halvings typically precede bull markets, the post-halving period has seen Bitcoin's price underperform traditional assets like gold and the S&P 500 according to CaseBitcoin. This suggests that the 2025-2028 cycle may be defined by structural challenges, including macroeconomic headwinds and regulatory uncertainty.

6. Implications for Investors

The confluence of these on-chain metrics points to a market in transition. Investors should:
- Monitor active addresses for signs of a bottoming process (e.g., a sustained rebound to 1 million+).
- Watch NUPL and MVRV for shifts in sentiment, particularly if the MVRV ratio crosses above 1.
- Assess miner behavior for potential capitulation events, which could trigger short-term volatility.

While the bearish case is compelling, history reminds us that Bitcoin's cycles are cyclical, not linear. The current correction may be a precursor to a new bull phase, but patience and discipline will be critical in navigating the next leg of the market.

Conclusion

Bitcoin's four-year cycle is now in a bearish phase, driven by demand exhaustion and deteriorating on-chain fundamentals. Active addresses, NUPL, MVRV, and miner revenue all point to a market in consolidation or correction. Investors must remain vigilant, using these metrics to gauge the depth of the downturn and identify potential inflection points. As always, the key to navigating Bitcoin's cycles lies in understanding the data-and acting accordingly.