- Bitcoin’s short-term correction doesn’t signal the end of the bull market, as key on-chain data remains bullish.
- Adjusted SOPR and Miner Position Index indicate that Bitcoin could bounce back as selling pressures decrease.
- Decreasing network fees and funding rates suggest a market cooldown, but long-term Bitcoin growth remains promising.
After Bitcoin broke through the $108,000 level, it underwent a distinct price reversal; this has led to doubts regarding the continued growth of the bull market. Based on the CryptoQuant’s analysis, many market participants are worried, but this phase may not mean the end of the bull cycle. However, this is more of a short term pull back and the major on-chain data suggest that the market remains in the bulls’ territory.
The most important metrics in this analysis are the Adjusted SOPR (Spent Output Profit Ratio). This metric filters out the noise of short term by only considering the transaction that lasts longer than one hour and it also applies a 7-day SMA for better view.
Bitcoin SOPR Indicator Decline
At the moment, the SOPR (7-SMA) is above 1 but heading lower, which may be an indication of falling profits for those in the market. In the past, when the SOPR is below 1, Bitcoin has usually seen a bounce back. This is the case because when selling at a loss often leads to market reversals which are quite frequent in the bull markets.
Another important measure is the Miner Position Index (MPI), also under the spotlight. The MPI indicates miner’s activity, especially when it comes to Bitcoin disposal. Traditionally, miners have been selling before halving occasions or at the top of market cycles.
As of now, the MPI is in the decline, with no major movements of the mass of Bitcoin to the exchanges. This indicates that the biggest mining companies appear to be not selling their Bitcoin and this could be because they believe in the currency. Nevertheless, sales to meet operating expenses remain a possibility and may affect short-term pricing trends.
Bull Market Potential Continues
The second important indicator of the market slowdown is a decrease in total network fees. Decreased network fees are an indication of the market slowdown because the transaction volumes have dropped. This point to the fact that the market is slowly coming back to normal and overheating is slowly coming to an end. It is only in the inactive period that the market gains stability as volatility decreases and the size of transactions declines.
Lastly, funding rates have also been declining which can be the sign of market sentiment change. After previous extreme drops in funding rates, particularly during negative funding, the funding rates for Bitcoin have tended to recover. It could be that things will turn around and there will be a comeback in the future. However, short term price action is still somewhat unpredictable and the overall direction of the market in the future cannot be confirmed.
The CryptoQuant data suggests that this bull market is not fully over, even if it may seem like it is cooling off right now. Investors should ignore short term movements and concentrate on the prospects beyond one year. The on-chain signals point to the idea that once the current downward trend is over, Bitcoin may well rise again and give investors a chance for a significant profit.
