Bitcoin price may bottom out at $56,000, on-chain data warns of a bearish market pattern

According to the latest research from on-chain data analysis firm CryptoQuant, Bitcoin prices face significant downside risk. The firm’s research director Julio Moreno based his assessment on multiple on-chain indicators, concluding that Bitcoin has entered a correction cycle since early November 2025. The bottom in USD terms is expected to be in the $56,000 to $60,000 range, leaving nearly 40% correction space from the current price.

As of the end of January 2026, Bitcoin hovers around $89,700, down more than 30% from the all-time high of $126,080 set in October 2025. CryptoQuant believes this correction differs markedly from previous bear market cycles—projected to be about 55%, significantly lower than the 70-80% declines seen in historical bear markets like 2022.

On-chain signals turn bearish, Bitcoin has entered a correction cycle

CryptoQuant’s “Bull Market Score” indicator, which combines technical and on-chain data dimensions, turned fully negative in November 2025 and has yet to recover effectively. Moreno points out that this is the first time since 2022 that the indicator has reset to zero, signaling a clear bearish outlook.

The specific factors triggering this correction include multiple aspects: Bitcoin price breaking below the yearly support line, a significant decline in on-chain network activity, shrinking trading volume, and a large liquidation event in October that directly drained buying momentum. The confluence of these factors ultimately shifted the market from a unidirectional rally to a period of oscillation and correction.

Demand momentum wanes, institutional positions continue to unwind

Unlike previous halving cycles, the fundamental driver behind this Bitcoin price adjustment stems from demand-side decline rather than supply-side factors. Moreno’s analysis highlights three major demand waves in 2025: the listing of US spot ETFs, market expectations around the presidential election, and the rise of corporate Bitcoin reserve strategies. However, since early October, these demand drivers have fallen below long-term trend levels.

Specifically, US spot ETFs turned net sellers in Q4 2025, selling approximately 24,000 BTC, contrasting sharply with the active buying in the previous year; institutional large holders show signs of unwinding positions; profit indicators have stagnated. Additionally, Bitcoin reserve companies, in response to potential risks, have built reserves worth about $1.44 billion, preparing for a prolonged sideways or downward trend.

Price retraces in stages, $70,000 to $56,000 as key support levels

CryptoQuant’s forecast framework suggests Bitcoin will confirm downward targets in stages. The first critical support level is around $70,000, which may be tested within the next 3 to 6 months. If the market fails to regain bullish momentum in this zone, further downside risks will gradually emerge.

Deeper support is expected in the $56,000 to $60,000 range. This zone is based on Bitcoin’s “realized price”—the average cost basis of all network holders—which currently hovers near $56,000. Historically, such levels often mark the extreme lows of a bear market. If prices reach this zone, it would represent about a 55% retracement from the high. Moreno’s timing estimates suggest this deeper decline could occur in the second half of 2026.

Limited rebound prospects, liquidity remains a key variable

Despite the uncertain outlook, Moreno emphasizes that this correction is relatively mild and urges long-term investors to avoid panic selling. However, a potential rebound requires new support forces. Market observers note that Bitcoin’s annual performance in 2025 is the first loss since the 2022 bear market, posing challenges to bullish expectations for 2026.

Key variables for a rebound include: the recovery of institutional buying strength, marginal improvements in global liquidity (such as potential Fed rate cuts), and renewed market enthusiasm. CryptoQuant’s research highlights that the current market structure bears similarities to the setup before the 2022 crash, and investors should prepare for continued volatility. The critical support in the coming months is at $70,000, with a longer-term structural bottom in the $56,000 to $60,000 range, both serving as potential tests of market confidence.