CryptoQuant has analyzed six stages of Bitcoin's price decline through on-chain demand signals, providing valuable insights for investors.
Six Stages of Declining On-Chain Demand
First Stage (Not mentioned in the original text): Bitcoin is in an upward trend, with prices rising steadily and on-chain demand indicators also showing growth.
Second Stage: Bitcoin's price hits an all-time high of $126,000, with on-chain demand indicators also peaking. In this stage, demand and price signals are highly consistent, further solidifying the bullish outlook.
Third Stage: Divergence begins to appear in the market. The on-chain demand growth indicator fails to break through previous highs, falling back to $123,000. This signals a crack in the upward trend: although prices remain high, on-chain data shows that bullish momentum is weakening.
Fourth Stage: Bitcoin's price falls back to $114,000, and the demand indicator shows a clear bearish structure—both highs and lows are constantly moving downwards, which is a typical sign of trend reversal. However, at this time, Bitcoin's price is still above $110,000.
Fifth Stage: Bitcoin's price further declines to $101,000. As the highs in the demand data continue to decrease, the price also gradually declines. Continued weakness in demand for several weeks indicates that prices will fall further.
Sixth Stage: On November 16, Bitcoin fell to $94,000 and broke below the 50-day Simple Moving Average (SMA50) on the weekly chart. Analysis shows that the SMA50 has lost its upward trajectory; both demand and price movements are clearly weak. CryptoQuant believes this is a key on-chain signal, prompting investors to take action.
Practical Application of On-Chain Rules
This methodology and its visualization are based on what CryptoQuant calls the "on-chain candlestick rule." According to this method, if the demand indicator breaks its bullish structure shortly after the price reaches its peak, then taking a profit-taking strategy and monitoring other price or on-chain signals for further confirmation is considered a prudent approach.
The analysis pointed out that each of the six stages provided an earlier warning signal than the previous stage. Investors who track demand growth indicators in real time have multiple opportunities to adjust their risk exposure before the decline is complete. Analysts emphasize that this shift did not happen suddenly, but took weeks, providing investors with multiple decision points.
Current Outlook and Market Scenario
Currently, the on-chain demand growth indicator has fallen sharply in recent months and is now approaching the lower limit of its index. Whether this represents a bottom similar to the accumulation phase before the 2025 rebound, or a structurally weaker situation compared to previous cycles, remains to be seen and is being closely watched by market participants.
CryptoQuant's report also draws attention to the duration of the decline. The entire deterioration process of on-chain demand lasted for months, reflecting the slow and gradual rebound of the previous cycle, in which the recovery of the demand indicator unfolded in a similar step-by-step process.