Bitcoin is still above $88,000 to $90,000 until December 22, but the market structure beneath the price looks more fragile. Recent volatility, decreasing liquidity, and declining demand have raised concerns that cryptocurrencies may transition from a late-stage rally to an early bear market as January 2026 approaches.
Several indicators on the series and market structure now point in the same direction. None of these signals alone confirms a full bear market. However, together they indicate increased downside risk and weakened support.
The apparent growth in demand for Bitcoin has begun to renew.
The apparent growth in demand for Bitcoin tracks the amount of new buying pressure compared to the available supply.
The latest data shows a slowdown in demand growth after several waves earlier in the cycle. While Bitcoin's price remained high throughout much of 2025, demand failed to achieve new record levels.
This divergence suggests that price strength has relied more on momentum and leverage rather than fresh spot buying.
Historically, when demand growth stops or declines while prices remain high, markets shift from accumulation to distribution. This often represents the early stages of a bear market or prolonged consolidation.
U.S. spot Bitcoin fund flows are losing momentum.
U.S. fast Bitcoin funds were the strongest source of structural demand in this cycle.
In 2024, flows into exchange-traded funds accelerated steadily until the end of the year. In contrast, the fourth quarter of 2025 shows a flattening of inflows, with declines in some periods.
This shift is significant because exchange-traded funds represent long-term capital rather than short-term trading.
When demand for exchange-traded funds slows while prices remain high, it indicates that large buyers are pulling back. Without sustainable institutional flows, Bitcoin becomes more susceptible to volatility caused by derivatives and speculative positions.
Wallets holding 100 to 1,000 Bitcoins, often referred to as 'whales', are typically associated with advanced investors and funds.
The latest data shows a sharp decline in whale holdings on a year-over-year basis. A similar behavior was observed in late 2021 and early 2022, before deeper market declines.
This does not mean panic selling.
It rather indicates risk reduction by experienced holders. Historically, when this batch is distributed while prices stay high, it reflects expectations of lower returns or continued consolidation for a longer period.
Funding rates are trending down across exchanges.
Funding rates measure the cost that traders pay to hold leveraged positions.
Across major exchanges, Bitcoin funding rates have entered a clear downward trend. This indicates a decline in demand for financial leverage, even as prices remain relatively high.
In bull markets, strong upward movements support increased financing and sustained long-term demand.
In contrast, declining funding rates indicate that traders are less confident and less willing to pay to stay long-term. This sentiment often precedes choppy price action or trend reversals in general.
Bitcoin has dropped below the 365-day moving average.
The 365-day moving average is a long-term trend indicator that historically separates bull markets from bear markets.
Bitcoin has now spent its first sustained period below this level since early 2022. Previous macro-driven sell-offs in 2024 and early 2025 tested this level but failed to close below it.
A persistent break below the 365-day average does not guarantee a collapse. However, it suggests a shift in long-term momentum and increases the likelihood of facing stronger resistance.
How far can Bitcoin drop if a bear market develops?
If these signals continue to align, historical data provides a reference point rather than a prediction.
The realized price of Bitcoin, currently around $56,000, represents the average cost basis for all holders. In previous bear markets, Bitcoin often reached a low near or slightly below this level.
This does not mean Bitcoin must drop to $56,000. It indicates that in a full downturn scenario, long-term buyers have historically approached that area.
Between current levels and the realized price, there exists a wide range of potential outcomes, including prolonged sideways movement instead of a sharp decline.
As of December 22, Bitcoin remains range-bound with weak liquidity and high sensitivity to leverage-driven moves. Retail sector participation appears cautious, while institutional flows have slowed.
Altcoins remain more vulnerable than Bitcoin. They rely more on retail demand and suffer faster when liquidity weakens.
When these five charts are combined, they suggest that cryptocurrencies may enter a distribution phase at the end of the cycle, with an increasing risk of a bear market emerging in early 2026 if demand does not recover.
The trend is weakening, but not broken to an irreparable extent. However, the margin of error is shrinking.
