Bitcoin On-Chain Signals Turn Bearish as Market Loses Liquidity

Most Bitcoin on-chain indicators have turned bearish, raising concerns that the market may be transitioning out of its late-cycle phase and into a structural downturn. Several high-confidence models — from MVRV Z-score to the CryptoQuant P&L Index — are now aligned in signalling rising downside risk as liquidity conditions soften across global markets.

The aggregation of signals paints a pattern familiar to long-term crypto analysts: when macro liquidity contracts and on-chain behavioural indicators flash red simultaneously, Bitcoin tends to lose its upward momentum. And the market noticed.

Most Bitcoin on-chain indicators are bearish. Without macro liquidity, we enter a bear cycle. pic.twitter.com/6uy298q5Wo

— Ki Young Ju (@ki_young_ju) December 3, 2025

The chart below — a composite heatmap of major on-chain models — shows the majority of metrics firmly in bearish territory, especially those tied to trader profitability, network activity and velocity of stablecoins, which often lead cycle transitions. :contentReference[oaicite:1]{index=1}

Liquidity Is the Missing Ingredient

Bitcoin’s resilience in 2023–2025 was largely powered by abundant liquidity and strong institutional inflows. But as liquidity tightens — both in dollar markets and stablecoin issuance — speculative momentum begins to break down. Historically, that shift has preceded multi-quarter consolidation or full bear cycles.

Flow-wise, derivatives positioning has also turned more defensive. Spot demand has softened, while realized profit margins are contracting — a combination that typically pressures price during macro slowdowns.

Why This Cycle Feels Different

Veteran crypto traders will recall that late-cycle on-chain degradation isn’t unusual. What is unusual is how quickly the indicators flipped red, suggesting that the market may have been more leveraged and liquidity-dependent than many assumed.

Inter-exchange flows now show reduced accumulation behaviour. Stablecoin liquidity — a reliable proxy for net buying power — continues to ebb. Network activity indices are rolling over, signalling fading user momentum.

Without a rebound in global liquidity, Bitcoin may be entering a structurally weaker environment.

Change of Strategy: MSTR Prepares for a Bear Market

Adding to the shifting landscape, Strategy (MSTR) — one of Bitcoin’s most prominent corporate adopters — has announced a major pivot in its treasury management framework. The company raised more than $1.44 billion through common equity issuance to build a dedicated US dollar reserve for dividend payments and interest obligations for at least 12 months, with a stated aim to extend that runway to 24 months.

Critically, MSTR disclosed that it may sell Bitcoin or Bitcoin derivatives as part of its risk-management options. That marks a departure from its aggressive 2020–2025 playbook, which largely focused on issuing equity or convertibles to buy more BTC.

This new dual-reserve model — long-duration Bitcoin + short-duration USD liquidity — materially reduces the probability of forced BTC sales during market downturns. At the same time, it removes a powerful marginal buyer from the market, softening one of the structural demand engines that previously amplified bull cycles.

The takeaway? Institutions are preparing for a less forgiving market regime — and Bitcoin’s on-chain data appears to agree.