On-Chain Indicators Turn Bearish
The CryptoQuant Bull-Bear Index flashed bearish this week, marking the first such shift since mid-2024. The flagship composite, which integrates on-chain, derivatives, and investor cost-basis metrics, turned following a sharp October deleveraging event and weakening fundamentals across spot and futures markets.
CryptoQuant's research report confirmed that Bitcoin's Bull Score Index plummeted from 80 to 20, signaling that key on-chain momentum indicators have deteriorated sharply. Exchange netflows, realized profit margins, and miner-to-exchange flows all show significant weakness, according to the analysis.
Deleveraging Event and Market Impact
Head of Research Julio Moreno described the move as a "structural reset," noting that over $20 billion in open interest was wiped out during the Oct. 10 liquidation. The event represented the largest dollar-value flush in Bitcoin's history, though Moreno stressed this does not "guarantee a bear market" unless spot demand continues to weaken.
Bitcoin trades around $107,000 at press time, down from $126,000 at the start of Q3. Analysts note a divergence forming between on-chain weakness and spot accumulation behavior, creating uncertainty about the market's near-term direction.
Diverging Investor Behavior
Glassnode and CryptoQuant data both show renewed accumulation among wallets holding 1 to 1,000 Bitcoin, while larger entities have paused distribution. This accumulation "mirrors late-2020 cycle behavior," when capitulation signals preceded a major rebound, suggesting the current weakness may be temporary.
Corroborating Bearish Assessments
Several major institutional research desks, including 10x Research and Phemex Analytics, corroborate CryptoQuant's bearish assessment. Both groups report that the Bull-Bear Market Cycle Indicator's 365-day moving average has dropped near zero, a level historically preceding "prolonged downturns" when confirmed by derivatives contraction.
Sentiment and Potential Contrarian Opportunities
Bitcoin open interest variation has fallen to 2025 lows, placing sentiment in what CryptoQuant calls the "extreme fear region." These levels have consistently aligned with macro price bottoms in past cycles, potentially signaling an opportunity for contrarian investors rather than an extended decline.
Bullish Interpretations and Spot Demand
While short-term models flag bearish risks, bullish interpretations remain within CryptoQuant's analysis. Analyst Darkfost argued that spot accumulation has surged following the Oct. 10 flush, with volumes on the platform doubling from $3-5 billion per day to $5-10 billion, indicating investors are repositioning from leverage to underlying exposure.
Market Cycle Theory and Macro Headwinds
Market cycle theorists maintain that October 2025 could represent the market's cyclical peak per Bitcoin's four-year halving pattern, projecting a drawdown into late 2026 followed by reaccumulation. Analysts caution that macro headwinds, including U.S.-China tariff talks and decreasing ETF inflows, may amplify volatility through year-end.