Matrixport Research: Bitcoin Enters "Micro Bear Market," Trend Turns Bearish Amid Policy Uncertainty

Bitcoin has shown a significant pullback near its highs, while our trend model and on-chain indicators had already turned bearish before the decline, subsequently leading to a drop of about 10% in Bitcoin, validating this structural turning point. This round of pullback is not as sharp as a deep bear market, but is more akin to the historically recurring "mini bear markets": weakening trends, declining momentum, and a lack of macro catalysts to drive a new round of increases. As ETF inflows slow down and the Federal Reserve signals a more cautious stance, downward pressure continues to accumulate, marking the market's official transition from an expansion phase to a defensive mode.

Early Signals of Trend Reversal: Structure Shifts from Expansion to Contraction

Multiple key trend indicators turned bearish almost simultaneously, providing sufficient structural justification for this round of market adjustment. Bitcoin triggered a bearish trend model near $112,000, followed by a price drop below the 21-week moving average, which has historically been a dividing line between bull and bear markets. Meanwhile, the Realized Cap / Market Cap ratio slid from the expansion range into the contraction zone, with on-chain momentum cooling off across the board, as the market shifted from an "incremental era" to a "stock game."

Although ETF funds had been continuously accumulating positions, after the price pulled back from its highs, buying momentum was noticeably weaker than before, and native funds actively deleveraging further amplified the downward pressure. More importantly, if the price further dips to around $93,000—corresponding to a previously rapid rise but with thin trading volume—structural support may be weaker, leading to further amplified volatility.

These signals collectively indicate that Bitcoin is undergoing a typical "mini bear market": the decline may be in the range of 30-40%, but it is unlikely to result in a large-scale collapse similar to a 70% drop. The key during this adjustment period is how to manage positions amid structural weakness, rather than blindly adding to positions at lower prices.

Narrowing Policy Window: Market's "Easing Fantasy" Towards the Federal Reserve Cools

This round of structural weakening is closely related to the uncertainty of macro policies. In September, the Federal Reserve initiated interest rate cuts, but the extent was less than expected; Powell's hawkish remarks on October 28 directly triggered this decline. The market's bets on another rate cut at the December FOMC remain relatively high, but we believe the likelihood of the Federal Reserve maintaining rates is greater, which means the market's anticipated "Christmas rebound" is unlikely to materialize.

At the same time, ETF investors have been continuously buying on dips during the price decline, raising their cost basis. As the holding structure continues to accumulate, once market sentiment changes, ETF investors may realize their exposure is too high, triggering a faster pace of capital outflow.

Overall, Bitcoin's current structure is closer to a "mini bear market" rather than a systemic collapse. Before Bitcoin reclaims the 21-week moving average, the odds of chasing a rebound are not high. At this stage, traders should focus on key support and resistance levels and take appropriate risk hedging measures to navigate the adjustment period more steadily.

The above views are derived from Matrix on Target. Contact us for the complete report from Matrix on Target.

Disclaimer: The market carries risks, and investment should be approached with caution. This article does not constitute investment advice. Trading in digital assets may involve significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions made based on the information provided in this content.