5 Charts Indicating Bitcoin Might Enter a Bear Market in Early 2026

As of December 22, Bitcoin's price is holding steady between $88,000 and $90,000. However, the market conditions underneath this price appear increasingly unstable. The recent volatility, reduced liquidity, and declining demand have raised alarms that the cryptocurrency market may be shifting from a late-stage bull phase to the onset of a bear market as we approach January 2026.

Key Takeaways

Slowing Demand: Bitcoin's demand growth is declining, signaling potential market distribution rather than accumulation.
ETF Inflow Decrease: The US spot Bitcoin ETFs, a significant source of demand, are experiencing flattened inflows, indicating reduced institutional enthusiasm.
Diminished Dolphin Holdings: Wallets holding between 100 to 1,000 BTC are reducing their positions, reflecting risk management rather than panic.
Lower Funding Rates: Funding rates show a downward trend, suggesting traders are less confident in holding leveraged positions.
Falling Below Moving Average: Bitcoin has crossed below its 365-day moving average, which historically separates bear markets from bull markets.

Several indicators related to market structure and on-chain activity are now aligned. Individually, these signals may not definitively indicate a bear market. However, together, they point towards increasing downside risks and weakening support for Bitcoin.

Bitcoin’s Demand Growth Is Showing Signs of Weakness

Bitcoin's demand growth reflects the purchasing pressure relative to available supply in the market. Recent data indicates that demand growth is slowing down after showing strength earlier in the cycle. While Bitcoin’s price remained high through much of 2025, demand did not reach new peaks.

This divergence implies that the price stability is more reliant on momentum and leverage than new spot buying. Historically, when demand growth flattens or declines while prices stay high, it often signals a shift from accumulation to distribution, marking an onset of a bear market or prolonged consolidation.

US Spot Bitcoin ETF Inflows Are Losing Their Momentum

US spot Bitcoin ETFs have played a crucial role as a source of structural demand in this current market cycle. Throughout 2024, ETF inflows increased steadily towards the end of the year. However, the fourth quarter of 2025 is showing signs of flattening and even decline in inflows.

This trend is significant because ETFs generally indicate long-term capital investments rather than short-term trading. A slowdown in ETF demand while Bitcoin’s price remains high suggests that large institutional buyers may be pulling back, making Bitcoin more susceptible to price fluctuations influenced by derivatives and speculative trading.

Dolphin Wallets Are Cutting Back on Holdings

Wallets that hold between 100 and 1,000 BTC, commonly known as "dolphins," are typically associated with experienced investors and funds. Current data reveals a notable decrease in these holdings over the past year. Similar patterns were observed in late 2021 and early 2022, which preceded deeper market corrections.

This trend does not indicate panic selling but points to a strategy of risk reduction by these informed holders. Historically, when this group starts distributing their holdings while prices remain elevated, it signals expectations of lower returns or an extended period of consolidation.

Funding Rates Are Declining Across Exchanges

Funding rates are important indicators that reflect the cost traders incur to maintain leveraged positions. Recently, Bitcoin funding rates have displayed a clear downward trend across major exchanges, suggesting decreasing appetite for leverage even though the price has remained relatively high.

In bullish markets, rallying prices are typically supported by rising funding rates and sustained demand for long positions. Conversely, declining funding rates indicate that traders are losing confidence and are less willing to pay to maintain long positions, often foreshadowing more turbulent price movements or significant trend reversals.

Bitcoin Has Fallen Below the Key 365-Day Moving Average

The 365-day moving average serves as a long-term trend indicator that often delineates bull markets from bear markets. Bitcoin has recently dropped below this key level for the first time in a sustained manner since early 2022. Previous sell-offs in 2024 and early 2025 tested this critical support but did not manage to stay below it.

While a sustained break below the 365-day average does not ensure a market crash, it does indicate a shift in long-term momentum, increasing the likelihood that any upcoming rallies will face stronger resistance.

Potential Outcomes for Bitcoin in a Possible Bear Market

If these trends continue, historical data can provide reference points, though not precise predictions. Currently, Bitcoin’s realized price is around $56,000, which reflects the average cost basis for all holders. Looking back at previous bear markets, Bitcoin has often bottomed around or just below this level.

This does not necessarily mean Bitcoin will drop to $56,000, but it indicates that in a bear market, long-term buyers typically re-enter the market closer to this range. There is a broad spectrum of possible outcomes between the current price and the realized price, which could include prolonged sideways movement instead of a steep decline.

Current Market Implications

As of December 22, Bitcoin's price is fluctuating within a narrow range, characterized by thin liquidity and high sensitivity to leverage-induced price moves. Retail trading activity appears cautious, and institutional flows have significantly slowed down. Other cryptocurrencies, or altcoins, are currently more exposed than Bitcoin, as they rely more on retail demand and tend to suffer more when liquidity lessens.

Taken together, these five charts suggest that the cryptocurrency market may be entering a late-cycle distribution phase, with an increased risk of a bear market emerging in early 2026 if demand does not recover. While the trend is weakening, it is not irreparably broken, but the margin for error is diminishing.