On-Chain stats suggest a shallow Bitcoin bear market with a bottom at $56K

The shallow bear market forecast comes as the Bitcoin bull cycle turns bearish amid negative market conditions.

Given the current state of the crypto market, all on-chain statistics indicate that a bear cycle is underway. However, according to an analysis by CryptoQuant, the upcoming red season will not be as severe as the previous ones.

The last weekly magazine report from the market research firm revealed that BTC could post a 55% drop from its all-time high during bear season. Such a move could put the asset’s bottom around $56,000, which would mark the smallest decline ever.

BTC could fall to $56,000

Historically, bitcoin bear market bottoms have aligned with realized price metrics. The realized price is currently around $56,000 and is slightly increasing. This has led market experts to believe that the coming bear cycle could be shallow. Notably, analysts expect BTC to find interim support around $70,000.

These predictions come as the bitcoin bull cycle turns bearish amid negative market conditions. Demand growth has slowed and derivatives markets are experiencing declining risk appetite. With demand waves driving Bitcoin’s four-year cycles, the current downturn reinforces the belief that Bitcoin’s behavior is driven by expansions and contractions of demand growth.

The market has seen three major waves of demand since 2023, driven by the launch of the spot exchange-traded fund (ETF) market in the United States, the outcome of the US presidential election, and the rise of Bitcoin Treasury companies. However, since the beginning of October 2025, the demand trend has reversed, indicating that this cycle has realized most of the increasing demand wave.

Unfortunately, bear seasons often begin when demand growth peaks and reverses, regardless of supply-side dynamics.

The beginning of the bear market

Furthermore, US spot Bitcoin ETFs have become net sellers in the fourth quarter of 2025, maintaining a trend that is in stark contrast to the strong accumulation we saw in the fourth quarter of 2024. This time last year, ETF holdings had increased from 293,000 BTC to 496,000 BTC; however, they are down 24,000 BTC this year. Addresses holding 100 to 1,000 BTC now reflect the reduced demand seen in late 2021, just before the 2022 bear market.

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On the derivatives front, the 365-day moving average of perpetual futures funding rates fell to a two-year low. This means that investors are less willing to hold long exposure – this pattern is often observed during bear phases.