The kids were being harassed by the Blair Witch CultPretty much every single thing can be attributed to something not supernatural. The little twig figures, the stones, (mostly) everything was done by the remnants of the Blair Witch-worshipping cult commune that was disbanded in the 60s, mentioned by Josh in one of the movie's deleted scenes.
The kids are being stalked by one of the Gentry from Changeling: The LostThey inadvertently walk through a rather nondescript portal to the hedge early on in the film. The rest of the movie is the Keeper who owns the realm stalking them, planning to add them to it's collection. Reality warping is perfectly within a True Fae's powers, and it explains why they come across the same river twice. Josh is the only one who survives the movie ironically, becoming a changeling when he disappears, and then luring his friends to their deaths at the hands of the True Fae.
The kids are being chased by Slendy
The Blair Witch is the Demon.Clearly, one of these kids has very naughty ancestors. Both the witch and the demon have similar motives and like to play with their prey. It eventually decides to stop dicking around, possess Josh, and then lure his friends to their deaths for an encore.
Josh killed his two friends at the endWhen the witch claimed her previous victims in the past, she did it through the child murderer because she wasn't able to do it physically. And we know that Josh, who went missing, was in the house at the end because we heard him screaming. And it's implied that his friends are killed at the end, and we never actually saw Josh's body... ever. I'm not saying 100% that Josh killed his friends. But, if it did happened, I wouldn't be shocked.
Rustin Parr is still alive.And he killed them. Why else would the climax take place in his house?
The Blair Witch unleashed a Candarian Demon.Makes as much sense as anything else.
The Blair Witch was a scapegoat.Elly Kedward, the original "Blair Witch" who was killed during the 18th century, isn't behind the haunting. The forests around Burkittsville have been haunted or possessed since long before her death. Kedward was apparently killed after a strange new disease was already affecting children in the town, and was also apparently innocent. Along with a generally negative attitude toward the area among native tribes who lived in the region before the Blair settlement was ever founded, this would suggest that something odd was going on before Kedward's death. After she was killed, whatever lived in the forest used her story to frighten away most of the town's residents by convincing them that she haunted it. Its chief goal, and the reason why it allowed the film to be made, is to avoid human habitation that might threaten the forest's continued existence, likely because its survival is contingent on that of the woods.