On-chain analytics firm CryptoQuant's bitcoin bull-bear indicator has recently signaled that the cryptocurrency's price is “overheated.”
bitcoin May Be Overheated According to This Indicator
As CryptoQuant's head of research, Julio Moreno, pointed out in a mail On
The first metric of interest here is the bitcoin Bull and Bear Market Cycle Indicator put together by the analytics company that tracks the various phases of bull and bear markets.
This is what the indicator looked like over the past year:
<img decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/CryptoQuant-Bitcoin-Bull-Bear-Indicator-Signals-Price-is-Overheated.jpeg" alt="bitcoin Bullish-Bear Indicator” width=”4096″ height=”2580″ loading=”lazy”/>
The trend in the bull-bear indicator for the cryptocurrency | Source: @jjcmoreno on X
As shown in the chart above, bitcoin has been within “bullish” territory since early 2023 and over the course of this run, the metric has reached “overheated bullish” levels in a few different cases.
From the chart you can see that these indicator values previously coincided with some type of maximum in the price of the cryptocurrency. With the asset's latest rally, it would appear that the market has re-entered this overheating territory.
According to Moreno, another metric, btc's “Miners' P&L Sustainability,” also suggests an overheated market. Basically, this indicator tracks whether miners are being overpaid or underpaid compared to the baseline value.
<img loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/1709568677_864_CryptoQuant-Bitcoin-Bull-Bear-Indicator-Signals-Price-is-Overheated.jpeg" alt="bitcoin miners ” width=”4096″ height=”2580″/>
The value of the metric appears to have spiked recently | Source: @jjcmoreno on X
As shown in the chart, bitcoin Miner's P&L sustainability has entered the “extremely overpaid” zone after the price surge, implying that a cooldown may be necessary.
Finally, short-term holders (STH) of bitcoin are also seeing big gains right now, which may be another sign that things have started to heat up.
<img loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/1709568677_367_CryptoQuant-Bitcoin-Bull-Bear-Indicator-Signals-Price-is-Overheated.jpeg" alt="Short-term bitcoin holders” width=”4096″ height=”2580″/>
Looks like the value of the metric has been quite high in recent days | Source: @jjcmoreno on X
STHs refer to bitcoin investors who purchased their coins in the last 155 days. These holders are considered the weak hands of the sector, who can easily sell upon seeing FUD or FOMO.
As the chart above shows, this cohort's unrealized gains have increased as the price of bitcoin has enjoyed its rally. Recently, they have achieved profit margins of over 45%.
At any given time, profit holders are more likely to sell their coins. As these profits increase, the likelihood that the investor will give in to the lure of profit-taking also increases.
As such, a large number of these fickle bitcoin investors holding significant profits means there is a high risk of a potential sell-off occurring in the market.
While all of these indicators point to the cryptocurrency perhaps being overvalued, there has still been a positive development in one indicator. This metric is “Inflows to Accumulation Addresses.”
<img loading="lazy" decoding="async" class="alignnone aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/1709568677_236_CryptoQuant-Bitcoin-Bull-Bear-Indicator-Signals-Price-is-Overheated.jpeg" alt="bitcoin accumulation” width=”4096″ height=”2580″/>
The indicator appears to have spiked | Source: @jjcmoreno on X
Accumulation addresses are defined as those that have a history of only buying bitcoin and never selling. Currently, these HODLers are seeing an unprecedented amount of inflows, which can definitely be a bullish sign.
btc Price
bitcoin has seen the latest continuation of its run in the past 24 hours as its price has now broken the $65,100 barrier.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/03/CryptoQuant-Bitcoin-Bull-Bear-Indicator-Signals-Price-is-Overheated" alt="bitcoin price chart” width=”1534″ height=”854″/>
btc has observed a sharp surge recently | Source: BTCUSD on TradingView
Featured image from Shutterstock.com, CryptoQuant.com, Chart from TradingView.com
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