Is Bitcoin overheating near $100K? 3 key areas to watch for

• Bitcoin has dragged itself back to the $98,000 price range.
• Its Funding Rate has remained positive for weeks.

As Bitcoin [BTC] flirts with the $100,000 mark, questions arise about the sustainability of its current rally.

While enthusiasm runs high among investors, several market indicators suggest that caution may be warranted.

So, AMBCrypto has analyzed three critical areas to understand whether Bitcoin is entering an overheated phase.

Bitcoin’s price momentum and overbought conditions

The daily BTC/USD chart revealed Bitcoin’s sharp upward trajectory, as the king coin broke out from consolidation near $65,000 just weeks ago.

The Relative Strength Index (RSI) stood at 78.6, indicating that Bitcoin was in overbought territory. Historically, RSI levels above 70 often precede short-term corrections as traders lock in profits.

Source: TradingView

Additionally, Bollinger Bands showed the price trading near the upper limit, hinting at increased volatility.

With the 20-day moving average significantly lagging the spot price, a mean reversion could be on the horizon, especially if profit-taking accelerates. 

As of this writing, BTC was trading at around $98,200, a slight increase from the 97,000 price zone it dropped to in the last trading session.

Bitcoin SOPR shows profit-taking

The Spent Output Profit Ratio (SOPR) chart painted a clearer picture of market behavior. SOPR, which measures whether coins moved on-chain are in profit, has been steadily rising alongside Bitcoin’s price.

AMBCrypto’s analysis showed that the SOPR values rose to around 1.08 during the past week, indicating heightened levels of realized profit.

Source: Glassnode

Historically, such elevated SOPR levels often coincide with local tops, as investors increasingly cash out during bullish euphoria.

A sudden dip in SOPR would signal increased selling pressure, potentially triggering a broader correction. As of this writing, the spike has slightly dropped, and the BTC SOPR was around 1.04. 

An overleveraged market

Another red flag came from the Bitcoin Funding Rates chart, which showed a sharp uptick across major exchanges.

Funding Rates are positive when long positions dominate the market, and excessively high rates suggest over-leveraging.

Source: CryptoQuant

At press time, Funding Rates were approaching levels last seen during the 2021 bull market peak, implying that speculative enthusiasm could be overheating.

Should a correction occur, overleveraged positions would likely exacerbate the sell-off through liquidations, adding downward pressure.

Market reset before stable trends?

While Bitcoin’s rally is undoubtedly historic, the convergence of overbought RSI levels, high SOPR values, and spiking Funding Rates signaled potential overheating.

Read Bitcoin’s [BTC] Price Prediction 2024-25

A healthy correction could reset the market, paving the way for sustainable growth rather than speculative mania.

While Bitcoin could continue its upward trajectory, the risks associated with its rapid ascent cannot be ignored.