The head of research at on-chain analytics firm CryptoQuant has explained why bitcoin could be at risk of another decline.
bitcoin is still on the verge of a bear market according to this indicator
In a newx.com/jjcmoreno/status/1824153865224327472″ target=”_blank”> mail On Day x, CryptoQuant’s Head of Research Julio Moreno has analyzed the latest trend in the bitcoin Bull-Bear Market Cycle Indicator. CryptoQuant’s “Bull-Bear Market Cycle Indicator” is an indicator based on the P&L ratio.
The P&L ratio combines a few popular btc metrics related to profit and loss, thereby summarizing the market balance in a single value. This indicator can determine whether the asset is going through a bullish or bearish period by comparing it to its 365-day moving average (MA).
When the cryptocurrency breaks above its 365-day moving average, it can be assumed that it is within a bull market. Similarly, falling below this moving average implies a transition into a bear market.
The Bull-Bear Market Cycle Indicator, the actual metric we're focusing on here, exists to make this pattern easier to follow; it tracks the distance between the profit-loss ratio and its 365-day moving average.
Now, here is a chart showing the trend of the bitcoin Bull-Bear Market Cycle Indicator over the past few years:
<img src="https://technicalterrence.com/wp-content/uploads/2024/08/CryptoQuant-CEO-Says-Bitcoin-Still-at-Risk-of-Further-Correction.jpeg" alt="bitcoin Bull-Bear Market Cycle Indicator” />
As shown in the chart above, bitcoin’s Bull-Bear Market Cycle indicator had reached extreme values during the all-time high (ATH) price earlier in the year (colored in red).
At these levels, the P&L ratio has a considerable gap from its 365-day moving average, so the cryptocurrency's bullish rally has overheated. The chart shows that the metric gave this signal on a few other occasions over the past two years as well, and each time, the asset's price hit the high.
However, these previous highs were not enough to contain the market in the long term, as the bull-bear market cycle indicator continued to remain within the bullish territory (shaded in orange), where the P&L ratio is above its 365-day MA.
However, the bull market momentum has finally shown signs of running out of steam, and the indicator even briefly dipped into bearish territory (light blue) during the recent price drop.
While the metric has recovered and returned to the bullish zone with the increase that btc's price has experienced, it is still very close to the neutral mark, meaning that it can potentially sink back into the bearish zone shortly. Based on this trend, Moreno notes that btc could still be at risk of seeing a new correction.
btc Price
bitcoin’s recovery has stalled recently as its price is still trading around the $58,500 mark.
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