Bitcoin Looks Locked in a Mid-Cycle Reset as On-Chain Data Stabilizes

Over the past month, analysts have increasingly positioned Bitcoin in an ongoing bear market. However, five key data points show the market is going through a mid-cycle reset after the sharp rally to record highs in late 2025.

On-chain and ETF data now show the selling wave is losing force. Instead of long-term investors exiting, the data points to late buyers being flushed out while stronger holders absorb supply.

This matters because mid-cycle resets often mark the transition from panic selling to accumulation.

US Bitcoin ETFs experienced their most violent selloff since launch during the first half of January. After strong inflows on January 2 and January 5, which brought in more than $1.1 billion combined, ETFs flipped sharply negative. 

Over the next three sessions, more than $1.1 billion left the funds.

This pattern is classic capitulation or washout. Investors who bought ETFs during the October and November rally entered when Bitcoin was near all-time highs. When price failed to hold above $95,000, many of those positions moved into losses. Redemptions followed quickly as risk managers and short-term traders cut exposure.

Importantly, this was not steady, months-long outflow behavior that defines bear markets. It was a fast, concentrated flush. That type of selling often exhausts itself because it removes the weakest holders first. 

Recent data already shows ETF flows stabilizing, which suggests the forced selling phase is nearing completion.

In market cycles, this type of ETF washout typically precedes sideways consolidation and eventual recovery.