Based on on-chain data, the Head of Research at analytics firm CryptoQuant explained why Bitcoin seems less bullish lately.
Bitcoin bull-bear market cycle indicator dropped recently
In one post new on X, Julio Moreno – Head of Research at CryptoQuant shared how the latest trend of the Bitcoin Bull-Bear Market Cycle Indicator plays out. This indicator is based on P&L Index data also developed by the analytics company.
P&L Index is a Bitcoin valuation indicator that determines whether the price is too low or too high. This metric combines the data of three popular indicators related to profit and loss to find its value (MVRV Ratio, NUPL and SOPR).
Historically, the interactions between the P&L Index and the 365-day moving average (MA) have had some important implications for the leading cryptocurrency by capitalization. The indicator intersects this line signaling a move to the bullish phase and vice versa.
The Bitcoin Bull Market Cycle Indicator measures the distance between the P&L Index and this important MA.
When the value of the indicator is greater than 0, it shows that BTC is in a bull market, as the P&L indicator is above the 365-day MA. Likewise, negative figures imply an active bear market.
Chappy report Bitcoin bull-bear market cycle | Source: Julio Moreno
The chart above shows the Bitcoin Bull-Bear Market Cycle Indicator rising high during the bull run, leading to a new all-time high (ATH).
In general, the higher the value of the metric, the more valuable the property is considered to be. During the ATH, the indicator recorded levels associated with an “overheating rally,” which is likely why BTC peaked at that time.
Since the price is currently consolidating, the value of the indicator cools down. It is still above zero, implying BTC is in a bull market, but not as hot as before. Moreno noted:
“Bitcoin market least bullish since September 2023.”
In September 2023, the asset moved sideways around the lows and consolidation eventually led to fresh bullish momentum. Thus, the cooling indicator may not cause damage to the property.
However, it remains to be seen whether the indicator has ended its decline or will continue to enter negative territory. In such a scenario, the market will turn bearish.
Ratio Bitcoin dominance drops the most in 5 months
Bitcoin is typically less volatile than altcoins, but earlier this week it was different.
The top cryptocurrency has taken a bigger hit than smaller tokens. As a result, market dominance decreased markedly as concerns emerged about the impact of upcoming payments to victims of the Mt. Gox in 2014.
BTC dominance (share of total cryptocurrency market value) fell 1.8% to 54.34%, the largest single-day percentage drop since January 12. In other words, investors can withdraw money from Bitcoin faster than from other coins. Data shows that the price of the leading cryptocurrency at one point hit a low below $59,000.
Source: TradingView
Selling off is not without reason. News that the defunct exchange planned to distribute 140,000 BTC to hack victims in July raised concerns that recipients would seek to sell once they received payment, creating excess supply in the market. That has added to the pressure since June 7 due to faster selling by miners and capital outflows from spot ETFs.
According to data tracked by Amberdata, concerns about a sell-off have fueled short-term BTC put demand on the Deribit exchange. Puts provide protection against slippage in the underlying asset’s price.
The 7-day and 1-month Call-Put Deviation represents the amount that traders are willing to pay to get asymmetric payouts in the upside or downside over a week and a month that have turned negative. That is a sign of new Put demand.
However, some observers say the actual selling pressure from the Mt. Gox could have been calculated.
“The exact amount of Mt. Gox July distribution has not been specified, but it is part of a larger return plan that includes 142,000 Bitcoin and 143,000 Bitcoin Cash, as well as fiat currency totaling 69 billion Japanese Yen ($432 million). However, creditors of Mt. Gox could hold Bitcoin instead of selling, as they are long-term investors who objected to previous US dollar settlement offers and could face capital gains taxes on sales,” Tagus Capital said.
You can see Bitcoin prices here.
Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
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