Bitcoin bear market enters final stage, chips are bullish but upward momentum remains lacking

Original Author: Ashrith Rao

Original Translation: Saoirse, Foresight News

After nine consecutive months of price decline, on-chain data for Bitcoin suggests the market is approaching the end of a bear market.

This cycle is characterized by three landmark features: a critical crossover in the cost basis of long-term and short-term holders, an unprecedented tightening of circulating supply, and a prolonged, sustained exit of speculative capital. This analysis is entirely data-driven, studying the market's transition from the pain of deep unrealized losses to accumulation by long-term capital, and is not based on subjective sentiment.

The Crossover Signal: The Shift in Market Dominance

The most intuitive signal from on-chain data dashboards is the convergence of the cost basis between long-term and short-term holders, a highly reliable indicator.

In mid-July 2026, Bitcoin exhibited a classic bear market bottoming signal: the realized price of short-term holders (STH) continued to decline relative to that of long-term holders (LTH). This represents collective stop-losses and exits by short-term retail investors, far more than a simple chart fluctuation.

Since the cycle's peak, the average cost basis for short-term holders has dropped sharply from approximately $112,500 to $69,000. Long-term holders, often more mature investors with better market information, have maintained a relatively stable cost basis. Meanwhile, the large-scale sell-off by recently entering capital has directly caused the significant drop in the short-term holder cost basis.

Historical patterns suggest this type of cost basis crossover often signals the commencement of the final phase of a bear market. Retail investors with lower risk tolerance are being sufficiently flushed out, and seasoned investors holding the supply begin to dictate the subsequent market direction.

If this crossover state can be sustained over a longer period, it indicates that the bottoming process has officially begun. A key confirmation criterion is holding the crossover zone for three consecutive days.

Supply Contraction: Formation of an 84% Supply Barrier

The crossover in long and short-term holding costs essentially represents a change in the control of market supply, a shift corroborated by the underlying supply structure.

Data from Alphractal shows that the supply share held by long-term Bitcoin holders has reached an all-time high of 84%. For the first time since 2016, the liquid circulating supply available to short-term traders is only 16% of the total. The total supply held long-term is 5.2 times that of short-term liquid supply, sufficient proof that mature investors are confident and have been consistently adding to positions during the market's weakening phase.

This scarcity of circulating supply has created a unique market structure: current market liquidity is at historic lows. While this can magnify price volatility on the downside, any significant increase in market demand is likely to trigger dramatic upward price movement, suggesting potential explosive upside if buying pressure intensifies. Data from the crypto quantitative research firm CryptoQuant supports this assessment: in May of this year, the net increase in holdings by long-term holders hit a six-year peak, cumulatively adding 1.29 million BTC.

Another clear characteristic of the supply structure is that aside from coins held for 6-12 months (which are transitioning into long-term holdings in large quantities), the supply held across all other holding periods continues to decline, indicating the ongoing exodus of speculative capital.

Bottom Signal Confirmation: Panic Selling in the Final Countdown

Combining the scale of loss-making supply with the Realized Capitalization Variance (RCV) model can corroborate that the market is in the late stages of a bear market.

K33 Research provides key data: on June 5th, the proportion of BTC circulating supply in a state of loss breached the 50% threshold; it has since fallen back to 46%. Historically, when the percentage of loss-making supply peaks and then declines below 50%, the subsequent bottoming formation period typically lasts between 13 to 101 days. This suggests that the bottoming process is currently in its final countdown. This current cycle's grinding bottom period is the second longest in history. These various signs strongly indicate that the worst phase of the market is likely over, rather than the downturn just beginning.

The Z-score of Realized Capitalization Variance calculated by CryptoQuant is at -2.35, an extremely low value placing it in the bottom 6% historically. This implies that profitability across the market is currently very thin. Looking back at history, such zones often precede periods of substantial future gains.

Currently, various indicators are beginning to resonate. While price has largely digested valuation pressures and negative macro conditions, a clear entry point for buying has not yet materialized.

Risk Reminder: Multiple Conditions Still Needed for a Trend Reversal

Although fundamental data like long-term holder supply appears bullish, various momentum technical indicators are still flashing warning signs.

Short-term holding momentum indicators remain broadly bearish overall, although their lows are gradually rising. The bullish sentiment index currently sits at just 20, far from the 60-point threshold needed to sustain an upward trend. Price has so far failed to successfully break through two key dynamic resistance levels: the True Market Mean Price and the Short-Term Holder Average Cost Basis.

Glassnode suggests that two prerequisites are needed to confirm a complete reversal of the bull-bear trend: further alleviation of pressure from panicked retail selling, and a stable and improving flow of institutional capital. Multiple models estimate that if Bitcoin miners persistently sell to realize gains, the price could test the $47,000 level. If price fails to break above the short-term high cost basis, the market will likely retrace to find support near the $58,000 level.

Overall, the cyclical low point appears imminent but has not yet been fully confirmed. The data indicates the market is in the final structural phase of slow recovery from the lows. While the complete logic for a reversal is not yet fully in place, the foundational conditions for a bottom are falling into place one by one.