Bitcoin's Weakening Buying Pressure and the Implications for a Potential Bear Market

The cryptocurrency market has long been a theater of cycles-bull runs punctuated by euphoria, followed by bear markets marked by capitulation. As 2025 draws to a close, Bitcoin (BTC) finds itself at a critical juncture. On-chain demand metrics and institutional behavior patterns are increasingly signaling a shift in momentum, with weakening buying pressure and structural imbalances raising concerns about a shallow bear market. This analysis synthesizes on-chain data, institutional flows, and macroeconomic trends to assess the implications for Bitcoin's price trajectory and the broader digital asset ecosystem.

On-Chain Demand Metrics: A Divergence in Activity

Bitcoin's on-chain activity has historically served as a leading indicator of market sentiment. In Q4 2025, however, key metrics suggest a divergence between price action and underlying demand. The Price Daily Active Addresses (DAA) metric, which measures the correlation between Bitcoin's price and the number of unique addresses transacting on the network, remains in negative territory. This divergence indicates that price gains are not supported by increased on-chain participation, a red flag for weakening demand.

Further evidence comes from the behavior of mid-sized "shark" wallets, which typically act as liquidity providers during accumulation phases. These wallets, holding between 100 and 1,000 BTC, have shifted from accumulation to distribution, with a significant drop in their numbers observed in Q4 2025. This trend introduces sustained sell-side pressure, as these entities offload holdings rather than add to them. Historically, such behavior has preceded bearish corrections, as seen in the 2018 and 2020 cycles.

Derivatives market indicators also reinforce the bearish bias. The 365-day moving average of perpetual futures funding rates has hit a two-year low, reflecting reduced risk appetite among investors. This aligns with patterns observed during prior bear markets, where funding rates contract as leveraged positions are unwound.

Institutional Behavior: A Mixed Picture

While on-chain metrics paint a cautionary tale, institutional demand for Bitcoin remains a double-edged sword. On one hand, regulatory clarity and expanded access through U.S. spot ETFs have driven institutional capital into the asset. By Q4 2025, the broader ETF market had grown to $191 billion in AUM, with Bitcoin ETFs attracting significant institutional interest. However, this inflow has reversed in recent months. U.S. spot ETFs became net sellers in Q4 2025, marking a stark contrast to the robust accumulation seen in Q4 2024.

Institutional participation has also evolved structurally. Bitcoin's dominance has surged to nearly 60%, reflecting a shift back to high-liquidity majors as altcoins underperform. Meanwhile, tokenized real-world assets (RWAs) have expanded from $7 billion to $24 billion in value, with Ethereum hosting $11.5 billion in tokenized assets according to Glassnode data. These developments suggest that institutional capital is increasingly allocating to Bitcoin and tokenized assets, but the recent outflows from ETFs indicate a cooling of enthusiasm.

Large institutional "whale" wallets, however, tell a different story. Over the past 30 days, large Bitcoin addresses have acquired over 375,000 BTC, with long-term holders doubling in number. This accumulation suggests that institutional investors are absorbing selling pressure, with nearly 50% of Bitcoin's realized cap now attributed to these entities. Yet, this activity is not enough to offset the broader bearish signals.

Bear Market Implications and Structural Shifts

The confluence of weakening on-chain demand and institutional outflows points to a potential bear market. CryptoQuant analysis suggests Bitcoin could experience a 55% drawdown from its all-time high, potentially bottoming around $56,000-the smallest drawdown on record. This shallow bear market is attributed to the realization of the bulk of the incremental demand wave driven by U.S. spot ETFs, the U.S. presidential election outcome, and the rise of Bitcoin Treasury companies according to market analysis.

Historical precedents offer some context. In Q4 2025, Bitcoin's price fell 22.54%, its worst quarterly performance since 2018. This decline was driven by slowing ETF inflows, increased selling pressure from retail investors, and a shift in activity toward ETFs and brokers. Despite these challenges, institutional investors appear to be holding their positions, with U.S. spot ETF holdings declining by less than 5% despite a 30% drawdown in prices according to recent data. This resilience suggests that institutional demand remains intact, albeit cautious.

However, the market is not without hope. Analysts at K33 Research and MEXC highlight the potential for rebalancing flows in January 2026, as fund managers reallocate capital into Bitcoin to restore portfolio allocations. This phenomenon has historically triggered incremental buying pressure during fiscal-year-end and January trading windows.

Conclusion: A Cautious Outlook

Bitcoin's Q4 2025 performance underscores the fragility of the current bull cycle. While institutional participation and tokenized assets have deepened liquidity and expanded use cases, the weakening of on-chain demand and ETF outflows signal a potential bear market. Investors must remain vigilant, as the market awaits a clear breakout to determine the next phase of Bitcoin's trajectory. For now, the data suggests a period of consolidation, with the possibility of a rebound in early 2026 contingent on macroeconomic clarity and renewed institutional confidence.