Paul Johnson Analysts warn that shrinking Bitcoin demand, ETF outflows, and a breakdown below key technical levels suggest the start of a new Bitcoin bear market cycle.
Bitcoin demand slows as market signals point to fresh bear cycle
Bitcoin’s apparent demand is showing clear signs of fatigue as new data reveals that momentum behind the world’s largest cryptocurrency is fading fast. Analysts believe that Bitcoin may have officially entered a new bear market phase, with on-chain metrics, ETF outflows, and weakening institutional interest painting a bleak short-term outlook for the crypto market.
According to blockchain analytics platform CryptoQuant, Bitcoin’s demand growth has fallen significantly since early October 2025, marking a shift away from the sustained accumulation patterns that supported its price through much of the year. The slowdown suggests that the bullish energy that once powered Bitcoin’s surge may have run its course.
ETF outflows and cooling investor appetite weigh on Bitcoin
The latest data shows that the total amount of Bitcoin held in spot ETFs dropped by approximately 24,000 BTC in the fourth quarter of 2025, a sharp reversal from the aggressive accumulation trend seen a year earlier. This contraction in holdings is being viewed by analysts as a sign that institutional investors are moving into a defensive stance, likely anticipating more price weakness ahead.
CryptoQuant’s report highlights that Bitcoin’s demand in the current market cycle came in three waves. The first wave was triggered in early 2024 following the approval of spot Bitcoin ETFs in the United States. The second was tied to the results of the 2024 presidential election, while the third came during the corporate treasury adoption phase when several companies expanded their BTC holdings.
By late 2025, however, this demand had begun to taper off. Analysts now believe that most of the incremental demand from institutions and retail investors has already been absorbed, removing a critical pillar of support for Bitcoin’s price.
Futures market data is also flashing warning signs. Funding rates for perpetual futures, which indicate the cost of maintaining leveraged positions, have dropped to their lowest level since December 2023. Such a decline often reflects declining trader enthusiasm and a lack of speculative appetite, reinforcing the view that Bitcoin’s momentum is waning.
Technical breakdown deepens Bitcoin bear market narrative
Beyond investor demand, technical indicators are now reinforcing the bearish sentiment surrounding Bitcoin. The cryptocurrency recently slipped below its 365-day moving average, a level widely regarded by traders as a dynamic support zone that often defines broader market direction.
Breaking below this long-term average has historically signaled a transition from bullish to bearish conditions. With the current structure now trending lower, analysts caution that the price may remain under pressure for an extended period unless new catalysts emerge to restore confidence.
While some market participants are still holding onto optimism for a rebound in 2026, sentiment across the broader crypto space remains fragile. CoinMarketCap’s Crypto Fear and Greed Index currently places market sentiment in “fear” territory, underlining how cautious traders have become.
Market braces for policy shifts as Trump pressures Fed
Macro conditions are also influencing Bitcoin’s trajectory. Only about 22 percent of investors expect the Federal Open Market Committee to lower interest rates at its upcoming January meeting, based on data from the CME Group’s FedWatch tool.
Lower rates typically serve as a tailwind for crypto markets, as they encourage risk-taking and reduce the opportunity cost of holding non-yielding assets like Bitcoin. However, with rates remaining elevated and liquidity tightening, speculative demand has diminished.
Adding to the intrigue, President Donald Trump has publicly pressed Federal Reserve Chairman Jerome Powell to initiate rate cuts before the 2026 economic cycle begins. Trump has even hinted at replacing Powell once his term expires in May 2026, in favor of a chair more supportive of lower rates.
Some analysts argue that if the administration successfully pushes for monetary easing next year, it could eventually inject new life into crypto markets. But for now, traders appear more focused on the immediate signals of weakness.
Fear dominates as investors await next Bitcoin cycle
Despite hopes for a turnaround in 2026, the data continues to suggest that Bitcoin’s current phase is defined by contraction rather than expansion. Reduced ETF inflows, subdued futures activity, and a technical breakdown below key support levels all point toward a period of sustained caution.
Market veterans note that such phases are not unusual in Bitcoin’s long-term cycles. Every bull run has historically been followed by a corrective period marked by reduced demand and consolidating prices before the next uptrend begins.
Until new drivers such as institutional reentry, macroeconomic easing, or increased on-chain activity return, the path ahead for Bitcoin may remain challenging. The coming months will likely test investor patience as the market navigates the tightening liquidity environment and a shifting policy backdrop.
For now, the data-driven consensus is clear Bitcoin demand is shrinking, and the market is signaling a return to bearish conditions. Whether this is a temporary cooldown or the start of a deeper correction remains the critical question for traders entering 2026.
Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards.
