Is Bitcoin heading towards a bear market? CryptoQuant warns that declining demand momentum is causing a stalemate between bulls and bears

On-Chain Data Analysis Firm CryptoQuant Recently Issued a Warning, Indicating a Clear Shift in Market Trends. According to its latest report, Bitcoin demand momentum is significantly weakening, and the cryptocurrency market may have entered a bear cycle, with subsequent downside risks not to be underestimated.

CryptoQuant pointed out that since 2023, Bitcoin has experienced three waves of spot demand surges, driven by the US spot ETF listing, the US presidential election, and Bitcoin reserve companies. However, after entering Q4 2025, this demand growth has fallen below the long-term trend line, signaling that the new buying interest in this cycle has largely been absorbed by the market.

Demand Cycle Peaks, Market Turning Point

How does the market determine the arrival of a bear market? Julio Moreno, Head of Research at CryptoQuant, revealed key signals indicating market direction. He stated that this correction actually began in mid-November 2025, shortly after the largest liquidation event in cryptocurrency history on October 10.

As of now (January 2026), Bitcoin’s price has fallen to around $90,030, a clear retracement from its all-time high. CryptoQuant believes that Bitcoin has lost critical support levels, and bullish momentum is gradually waning.

Based on historical experience, Bitcoin’s bear market bottom often aligns with the “Realized Price” (reflecting the average cost basis of all holders). Currently, this indicator is around $56,000. If the price tests this level, it would mean a decline of about 55% from the all-time high, potentially making it the bear market with the smallest retracement in history.

$70,000 as Key Support, Future Direction?

Given the current weakness, CryptoQuant has issued a two-stage risk warning. First, the $70,000 level is an important support zone that may face testing within the next 3 to 6 months.

If the market cannot regain bullish momentum, Bitcoin could further decline to $56,000. According to Moreno’s assessment, testing $70,000 could happen soon; a deeper drop to $56,000 might occur in the second half of 2026.

Notably, Bitcoin has broken below the 365-day moving average, a line often regarded in technical analysis as the bull-bear dividing line, further confirming that the market is indeed entering a turning phase.

Three Key Data Points Confirm: Signs of Capital Withdrawal

CryptoQuant listed three critical data points strongly confirming the “bear market has arrived” view, revealing shifts in capital flows from multiple dimensions:

Net Capital Outflow Reversal: In Q4 2025, US Bitcoin spot ETFs shifted to a “net outflow” status, with holdings decreasing by approximately 24,000 BTC. This contrasts sharply with the strong buying activity in the same period last year, marking a fundamental change in institutional investor sentiment.

Slowing Growth of Large Holders: Addresses holding 100 to 1,000 BTC (including ETFs and corporations) are growing at a rate below the long-term trend line. This deterioration in demand mirrors the situation at the end of 2021, which was also a precursor to the 2022 major bear market.

Cooling in Derivatives Market: Funding rates for perpetual contracts (calculated as a 365-day moving average) have fallen to the lowest levels since December 2023. Declining funding rates typically indicate reduced leverage willingness among bulls, a classic bear market feature, reflecting a significant decline in market risk appetite.

Demand Cycle Is the Core Driver, Not the Halving Event

CryptoQuant presents a disruptive view: the core engine driving Bitcoin’s four-year cycle is the “demand cycle,” rather than the commonly emphasized “halving event.” When demand peaks and begins to decline, a bear market often ensues regardless of supply-side dynamics.

This theory has important implications for investors re-evaluating market cycles. It suggests that monitoring capital flows and demand changes is more critical than simply tracking halving schedules.

Wall Street Divergence: Bulls and Bears in Fierce Battle

It is noteworthy that CryptoQuant’s bearish outlook sharply contrasts with recent views from major Wall Street firms, with market bulls and bears engaged in intense debate:

• Citigroup: Baseline scenario predicts Bitcoin will reach $143,000 in 12 months, with an optimistic scenario targeting $189,000.

• JPMorgan: Based on gold comparison valuation, maintains a target of $170,000.

• Standard Chartered: Although more cautious, has halved its 2026 target to $150,000 but remains optimistic.

• Bitwise: Firmly believes Bitcoin will hit a new all-time high in 2026.

This fierce clash of bullish and bearish perspectives fully reflects the current market’s divided outlook on Bitcoin’s future trajectory. On one side are on-chain data signals indicating capital withdrawal; on the other, traditional financial institutions’ confidence in long-term appreciation. Investors should carefully weigh both views and stay attentive to market developments.