Given the current state of the crypto market, all on-chain metrics indicate that a bear cycle is underway. However, the incoming red season may not be as severe as previous ones, according to an analysis by CryptoQuant.
The latest weekly report from the market research firm revealed that BTC may record a 55% drawdown from its all-time high during the bear season. Such a move could place the asset’s bottom around $56,000, marking the smallest drawdown on record.
BTC Could Bottom at $56K
Historically, bitcoin bear market bottoms have aligned with the realized price metric. The realized price is currently near $56,000 and is slightly increasing. This has led market experts to believe the incoming bear cycle could be shallow. Notably, analysts expect BTC to find intermediate 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 a weakening risk appetite. With demand waves driving Bitcoin’s four-year cycles, the current drawdown reinforces the belief that Bitcoin’s behaviour is governed by expansions and contractions in demand growth.
The market has seen three major demand waves since 2023, driven by the launch of the United States spot exchange-traded fund (ETF) market, the U.S. presidential election outcome, and the rise of Bitcoin Treasury companies. However, the demand trend has reversed since early October 2025, suggesting that this cycle has realized the bulk of its incremental demand wave.
Unfortunately, bear seasons tend to begin when demand growth peaks and rolls over, regardless of supply side dynamics.
The Onset of the Bear Market
Furthermore, U.S. spot Bitcoin ETFs have become net sellers in Q4 2025, maintaining a trend that sharply contrasts the strong accumulation seen in Q4 2024. By this time last year, ETF holdings had risen from 293,000 BTC to 496,000 BTC; however, they have declined by 24,000 BTC this year. Addresses holding 100 to 1,000 BTC are now echoing the reduced demand recorded at the end of 2021, just before the 2022 bear market.
On the derivatives front, the 365-day moving average of perpetual futures funding rates has fallen to its lowest level in two years. This means that investors are less willing to maintain long exposure – this pattern is often observed during bear phases.
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