In the past month, analysts have increasingly placed Bitcoin in a prolonged bear market. However, five key data points show the market is actually in the midst of a mid-cycle reset following the strong rally to all-time highs at the end of 2025.
On-chain and ETF data now show the selling wave is losing momentum. Instead of long-term holders exiting, the data suggests it's mainly late buyers being shaken out, while stronger holders are absorbing the supply.
This is important because mid-cycle resets are often the moment when panic selling transitions into accumulation.
ETF outflows signal washout, not long-term distribution
U.S. Bitcoin ETFs experienced their sharpest sell-off since launch in the first half of January. After strong inflows on January 2 and 5, when over $1.1 billion entered, the ETFs quickly reversed into significant outflows.
In the three sessions that followed, more than $1.1 billion was withdrawn from the funds.
This pattern is typical of capitulation or a washout. Investors who bought ETFs during the October and November rally stepped in when Bitcoin was near an all-time high. When the price failed to stay above $95,000, many of these positions went into the red. Then, rapid withdrawals followed as risk managers and short-term traders closed their positions.
Important: this was not a prolonged outflow like the one seen in bear markets. It was a quick, concentrated flush. Such sell waves often exhaust themselves because the weakest holders are eliminated first.
Recent data already shows ETF inflows are stabilizing, indicating the forced sell-off phase is nearly over.
In market cycles, such an ETF washout often comes first, followed by a sideways consolidation and eventually a recovery.
The ETF cost basis around $86,000 is now anchoring the price
CryptoQuant's ETF drawdown chart shows that the average realized price of Bitcoin held by ETFs is around $86,000. This means most ETF investors who entered since the October peak are now roughly at break-even.
This level is important. When the price fluctuates around the average purchase price of the largest group of buyers, selling pressure typically decreases.
Investors who have already taken losses have exited. The remaining holders usually wait for a recovery instead of selling at a small loss.
Historically, these cost basis zones act like gravitational forces. If Bitcoin falls too far below, dip buyers step in. If the price rises well above, profit-taking increases. Currently, Bitcoin is just slightly above this ETF anchor.
That explains why the market remains stable around $88,000 to $92,000, even after billions have been withdrawn from ETFs.
The ETF cost basis is now acting as a structural support level. This is typical of a mid-cycle reset rather than a bear market breakdown.
BlackRock Coinbase transfers reveal the redemption structure
Blockchain data shows BlackRock moved 3,743 BTC and 7,204 ETH to Coinbase Prime. At first glance, this looks like institutional selling.
But ETF mechanisms are important. When investors redeem their ETF shares, the fund must deliver Bitcoin to authorized participants. Coinbase Prime is the platform for storage and settlement of this process.
When the number of withdrawals increased last week, BlackRock had to move BTC and ETH to meet these obligations.
This flow reflects demand for liquidity, not a speculative move by BlackRock. The company doesn't control when investors exit—it only processes withdrawals. The timing of these transactions exactly matches the heavy ETF outflows at the beginning of January.
In bear markets, funds typically reduce their exposure over months. Now, we mainly see short-term investors leaving and ETFs settling these transactions.
This aligns with a reset, not a structural exit of institutional capital.
Coinbase Premium shows U.S. institutions are on pause
The Coinbase Premium Index turned sharply negative on January 12. This means Bitcoin is cheaper on Coinbase than on foreign exchanges.
Coinbase is primarily used by U.S. institutions and wealthy investors. A positive premium indicates that U.S. funds are aggressively buying.
When the premium is negative, it means demand has decreased.
At this moment, it's logical that everything is cooling down. ETF investors have just suffered significant losses. Many funds are waiting for inflows to stabilize before re-entering.
But the fact that no buying is occurring doesn't mean a lot is being sold. No massive amount of spot BTC is flowing into Coinbase. The price is simply not being pushed higher.
During a mid-cycle reset, institutional buyers often step aside temporarily while weaker hands are pushed out of the market. They return only when the price stabilizes again. This pattern is also visible in today's Coinbase Premium.
Exchange Netflows confirm supply withdrawal
The 30-day average of Bitcoin exchange netflows is at its highest level since October. More Bitcoin is flowing into exchanges, which typically indicates selling pressure.
Still, context matters. This supply primarily comes from ETFs reducing their positions and arbitrage desks handling redemptions. These are not long-term holders exiting en masse.
Despite this large inflow, the Bitcoin price did not collapse. The price remained in the low $90,000 range. This shows that buyers outside the ETF market are absorbing the additional supply. These include global traders, offshore funds, and long-term collectors.
If selling pressure emerges in the market but the price remains stable, this is usually a sign that weak hands are selling to stronger holders. This kind of process is common during mid-cycle resets.
What is the next step for the Bitcoin price?
All five data points point to the same conclusion. Bitcoin is currently undergoing an ETF-driven shake-out. Latecomers have exited. Long-term holders have remained.
As long as Bitcoin remains above the $86,000 ETF cost basis, the structure is positive. The price can then consolidate and possibly attempt to move toward $95,000 again.
If ETF inflows turn positive again, a test of $100,000 later this quarter is likely. A larger drop would require a new wave of ETF sell-offs.
So far, the data shows this phase is already beginning to fade.
