On July 18, 2026, CryptoQuant analyst Darkfost brought to light a set of “cost signals” that were originally circulated only within the on-chain data community: in the model he tracks, short-term holders defined as those with holding times of less than 6 months have seen their cost basis plummet from about $112,500 all the way down to around $69,000, recently dipping below the cost basis of long-term holders calculated after excluding chips held for over 7 years. This structural “inverted” state has persisted for at least 3 days, triggering a technical signal labeled as “the end of the bear market”. For a market that has endured roughly 9 months of price correction, this is undoubtedly an optimistic indicator, but the current price tells a different story: as of July 19, HTX markets show Bitcoin at approximately $64,928.32, still below the short-term holders' cost basis, and the perpetual contract weighted funding rate is only about 0.0032%, with near-zero leverage costs meaning sentiment leans more towards wait-and-see rather than betting on a reversal. Darkfost himself has left room in his analysis—this signal merely suggests that the bear market may be entering its final phase and does not indicate that the bear market is over or that a bottom has been established. He recommends using dollar-cost averaging to hedge timing risks, but does not package it as a “sure-win strategy.” Amid a conflicting pattern where technical indicators suggest an end while price and funding conditions remain cautious, what truly needs to declare its position are licensed platforms and institutional investors: they must decide on risk management whether to treat Bitcoin exposure as a high-risk asset or to moderate their stance, and explain in compliance terms whether and how to reference such singular on-chain signals, a choice that is becoming the starting point for regulation and institutional narratives in the latter half of the bear market.
Short-term costs break below long-term costs: how on-chain signals define the end of the bear market
In the on-chain indicators constructed by Darkfost at CryptoQuant, the core is not the price itself, but the “average purchase price” of two types of capital. Short-term holders are defined as investors with holding times of less than 6 months, while long-term holders have holding times exceeding 6 months. To avoid distorting results from “tombstone addresses” that have remained inactive for years, the calculation of long-term holders' cost basis actively excludes Bitcoin held for over 7 years, retaining only chips that have been traded or migrated within the last few years, thereby delineating a funding structure that is closer to reality: on one side, high-frequency inflow and outflow of short-term funds; on the other side, long-term funds that continue to endure volatility but remain in the market.
Over the past approximately 9 months, as the bear market progressed, these two cost curves began to diverge. The cost basis for short-term holders once neared $112,500 at high levels, reflecting significant capital entering at elevated prices, but has now fallen to about $69,000 and recently dropped below the adjusted cost basis of long-term holders. This state of “short-term costs lower than long-term costs” has persisted for at least 3 days, triggering the “end of the bear market” technical signal from CryptoQuant. Darkfost's interpretation is: as the price (currently about $64,928.32) falls below the short-term cost, yet still remains close to the long-term cost, it indicates that short-term speculators are generally experiencing significant unrealized losses, forced to sell out or exit passively, while long-term holders with lower cost bases and relatively milder loss pressures take on these sell pressures, transitioning the market from “short-term speculation” to “long-term handover.” However, he also emphasizes that this is merely an indication of a structural inflection point, neither equating to the end of the bear market nor implying that a definitive bottom has been established, and arguably better suited as a reference range for beginning or maintaining dollar-cost averaging, rather than a rationale for impulsive leverage expansion or aggressive full positions. In the context of licensed platforms and institutional risk committees, this type of signal depicts precisely a scenario where short-term capital is painfully cleared out, and long-term capital passively takes on the load, constituting the bear market's concluding image.
Price and funding rate diverge from optimistic narratives: licensed platforms dare not ease leverage
Numerically, this described phase of the “end of the bear market” sees short-term funds still in a state of loss rather than victory. As of July 19, Bitcoin's spot price is approximately $64,928.32, below the short-term holders' cost basis of about $69,000, placing overall capital that entered in the past 6 months in an unrealized loss state, with sentiment and liquidity skewed more towards “cautious observation” than “confirmation of a reversal.” Meanwhile, the weighted funding rate for perpetual contracts is merely about 0.0032%, nearly close to zero, maintaining a balance between long and short forces, with no signals of widespread greedy leverage or extreme panicked shorting, this combination of price pressure and calm leverage weakens any singular optimistic on-chain indicators' persuasive power within a risk management context.
In most jurisdictions, licensed derivatives platforms must set reasonable leverage limits and margin ratios per regulatory requirements, with enhanced risk disclosures for high-volatility assets. This means they cannot proactively ease Bitcoin margin and leverage parameters simply because of the on-chain structural signals indicating “the bear market or nearing its end,” particularly when short-term funds remain overall in an unrealized loss position and the funding rate has not significantly leaned towards the bulls. Conversely, in the risk management documents submitted by compliance teams to regulators, platforms often must explain: on one hand, referencing the clearing process represented by the short-term cost basis dropping below the long-term cost basis as suggested by Darkfost, while also articulating why they choose to maintain or even tighten risk exposure, considering that this cost basis has yet to break upward above the long-term cost basis and price and funding rates have not resonated to confirm a bull market. Ultimately providing a written rationale of “adhering to prudence under conflicting signals” offers compliance justification for inaction on easing leverage.
From on-chain indicators to compliance sales language: how Bitcoin products communicate risk
In the sales of licensed ETFs and structured products, narratives like “the last phase of the bear market” must first be dismantled into compliance-acceptable risk language rather than emotional mobilization slogans. The Bitcoin bear market has lasted about 9 months, which can be included in roadshow materials as an objective background of “long-term sluggishness,” but should not be packaged as “time dragging on inevitably leads to a rebound.” Sales language better aligns with: referencing that the short-term holder cost basis has dropped from about $112,500 to approximately $69,000 and has fallen below the long-term cost basis, sustaining this state for at least 3 days indicates that the clearing process may have entered its latter half, whilst also immediately indicating that this signal does not imply an immediate end to the bear market nor that a bottom has been established. Most national securities regulatory frameworks require highlighting risks in product promotions and avoiding exaggeration, hence if ETF issuers and brokers use terms like “bear market or nearing its end” in materials, they must present in the same location the fact that the price remains below the short-term cost basis, the perpetual funding rate hovers near zero, and market sentiment remains cautious, to demonstrate that this narrative is not promoting “the reversal has arrived,” but is providing a complete description of the risk environment.
When recommending dollar-cost averaging strategies to retail and high-net-worth clients, institutions must also incorporate Darkfost’s “does not represent an immediate reversal” and “no specific returns or timelines promised” into their risk disclosures, rather than leaving behind a one-sided statement of “dollar-cost averaging is more reasonable in this phase.” In terms of appropriateness assessment, sales personnel can define the current phase as one of “high volatility, high uncertainty” and state that dollar-cost averaging is merely a tool for smoothing costs, not a guarantee for traversing the cycle, and prompt a future condition for halting dollar-cost averaging: should the short-term holder cost basis subsequently break upward through the long-term holder cost basis, this could be seen as a confirmation signal for the beginning of a bull market phase. Only then can public products and brokers find compliance space to slightly adjust the risk levels and market outlook of Bitcoin-related products, for instance from a “continued bear market scenario” to a theoretical assumption of “possibly entering a new upward cycle,” but such adjustments must be based on verifiable on-chain data and not fabricated historical backtests or success rates. Briefings have explicitly prohibited fictitious quantification of past performance of this signal, practically indicating: licensed platforms can reference on-chain indicators, but must only position them as “auxiliary references,” discussing risks based on regulatory-checkable factual bases, and cannot package any singular indicator as an automatic “bull market confirmer” to replace comprehensive due diligence and appropriateness processes.
On-chain data entering risk management central: how compliance teams can use without being superstitious
In the risk management centers of licensed exchanges and custodians, on-chain data providers like CryptoQuant have become regulars. The cost basis for short-term and long-term holders will be displayed side by side with price curves, leverage usage rates, order book depth, and customer trading behaviors as a supplementary set of coordinates on a “risk radar.” Current on-chain data shows that the cost basis for short-term holders has plummeted from around $112,500 to about $69,000, and has fallen below the cost basis of long-term holders, excluding ultra-long holdings, for at least 3 days; as of July 19, the spot price is approximately $64,928.32, still below this short-term cost line, and the perpetual contract funding rate is around 0.0032%, showing almost no positive leverage sentiment. From a compliance viewpoint, this does not provide a direct answer of “should we buy or sell,” but is recorded as: short-term speculative positions are generally at unrealized losses, and if sentiment deteriorates further, could trigger a new wave of selling risk signal.
When these signals are documented in internal risk reports, they are linked to the stress testing and scenario analysis frameworks required by regulatory systems: compliance teams will calculate liquidity pressure points, margin call scales, customer concentration changes under the hypothetical scenario of “short-term holders continuously losing, price dropping X%”, then cross-validate with traditional volatility indicators, trading volumes, and data on capital inflows and outflows. If on-chain cost basis points towards the end of the bear market while price and funding rate remain cautious, reports often provide dual conclusions—on one hand marking “potential sell pressure may weaken,” while also reminding that “no bull market confirmation has yet occurred.” The key is that risk control and compliance will not write this cost basis signal, which has not been subjected to systematic backtesting, into any form of bull-bear demarcation line or as a “safety anchor” in sales language, but will define it as a risk indication that requires ongoing observation and verification with other data sources.
End of the bear market or long-term bottom grinding: choices of compliance agencies amid ambiguous signals
Under the current data composition, compliance teams see a typical “gray area”: the on-chain cost basis structure suggests the bear market may have entered its latter phase, with short-term holders’ cost basis sliding down and breaking below the long-term holders’ cost basis, signaling a potential weakening of sell pressure; however, as of July 19, the Bitcoin spot price is still about $64,928.32, below the short-term holders’ cost basis of approximately $69,000, the weighted funding rate for perpetual contracts is only about 0.0032%, and there are no signs of the crowded leverage typical at the initial stages of a bull market, nor has the condition of the short-term cost basis breaking upward through the long-term cost basis, “the confirmation condition for a bull market,” been met. Darkfost himself has clarified that this is more of a hint that the bear market may be entering its final phase, rather than declaring that the bottom is set. For regulatory bodies and licensed platforms, in the absence of historical backtesting and quantified success rates, and the prohibition of packaging singular indicators as definitive judgments, the more prudent choice is to acknowledge the reference value of on-chain data within internal risk management models, while maintaining a conservative stance on risk parameters and client disclosures: not adjusting the margin ratios or risk weights solely based on this signal, and emphasizing that this indicator is merely auxiliary observation rather than a promise of returns or a guarantee of trend. Looking ahead, the path roughly divides into two scenarios: if the subsequent short-term holders’ cost basis rises above the long-term holders’ cost basis while accompanied by rising funding rates and improved liquidity structure, platforms and compliance departments can gradually adjust the risk labels and exposure limits of related products through established procedures; if this signal is repeated or even fails, and prices remain pressed below the short-term cost, and funding stays subdued, then Bitcoin will continue to be managed within a high-risk asset framework, requiring higher risk buffers and stricter appropriateness reviews. Faced with a set of on-chain indicators that cannot yet be quantifiably validated, what compliance agencies must truly do is not rush to provide directional judgments, but to preset clear institutional response spaces and controllable risk boundaries for these two paths.
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