CryptoQuant Data Indicates Bitcoin in Cooling-Off, Not Reversal

CryptoQuant data shows Bitcoin is in a cooling-off phase, not a reversal, with indicators suggesting the bull market continues.

Bitcoin recently surged above $108,000 but then faced a price correction. This has raised concerns about the market’s future. Although most think that the bull market still has some way to go, others are now concerned that the correction could stick around for a while, as it started in March. Data from CryptoQuant indicates that the market is not yet in full reversal but in a cooling-off phase.

There are certain key indicators that one can use to understand it. The Adjusted SOPR (Spent Output Profit Ratio) is one important indicator. It filters out short-term noise by stripping observations below one hour and assumes a 7-day Simple Moving Average (SMA). The SOPR (7-SMA) is currently above 1 but declining. Historically, when Bitcoin’s SOPR drops below 1, it subsequently bounces upward as selling below the cost basis leads to a change in market sentiment.

Miners Hold Bitcoin, Indicating Cooling-Off in Bull Market

The Miner Position Index (MPI) is another important indicator. It monitors Bitcoin sales as well as the amount of miner activity. Halving events typically coincide with miners selling Bitcoin closer to market peaks or before them. As of now, the MPI is going down and there has not been many Bitcoin transfers to exchanges. This means the miners are holding Bitcoin and do not plan on selling anytime soon. However, smaller sales for operational costs may still happen.

Total network fees also reflect the activity of on-chain transactions. Fees are already going down, this suggests a decrease in on-chain activity. A lot of trading activity on the market could be why this is dropping off now. This is a signal that the overheating of the market that it experienced earlier has subsided.

Additionally, funding rates that reflect market sentiment have gone down. Historically, periods of extreme drops in funding rates have not ended well, except when the rates go negative, and in that case, Bitcoin is its best. This could be another price recovery if this is what happens.

While the correction occurred, onchain information signifies that the bull market still continues, with the current stage comparable to a cooling-off period instead of a closing period of the cycle. However, in the near term, the market still remains unpredictable. Investors are asked to keep their eyes on the big picture and not follow the quick fix.