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- Bitcoin’s bull market indicator is nearing overheated territory, hinting at a potential market cooldown or trend reversal.
- An analyst suggests investors wait for calmer zones instead of entering during an overheated bullish phase.
Bitcoin seems to be enjoying a bright future, but some analysts are becoming wary. According to Arab Chain, an on-chain analyst at CryptoQuant, the market is currently in a bullish zone.
But it’s not just a simple bullish trend; the market cycle indicator he uses, the Bitcoin Bull and Bear Market Cycle Indicator, suggests that conditions are approaching what’s known as an overheated bull zone. In simple terms, this means the euphoria may be running out of control.
Bitcoin’s Overheated Rally May Signal a Pullback Soon
This overheated zone usually occurs when the price has risen too quickly, too high, and for too long. According to Arab Chain, this often marks the beginning of a correction or even a sharp decline. So, even though the chart looks beautiful, many large investors are starting to hit the brakes.
They tend to take a wait-and-see approach, avoiding large purchases and waiting for a calmer moment before jumping back in. In fact, speculators are said to be closing positions and securing profits—because the market could suddenly “evaporate.”
Furthermore, Arab Chain highlights that strong spikes in markets like this are often followed by a downward rebound. So, if the price is nearing a peak, there’s a possibility of a rapid final surge followed by a sharp correction. This kind of thing isn’t a new story in the crypto space, but it still makes many people reconsider.
Interestingly, despite the ongoing overheating warnings, the medium- and long-term trends are still showing strength. The 30- to 365-day moving averages are still supporting the uptrend. This signals that, barring a major shock, the market still has the strength to rise. However, as mentioned earlier, excessively rapid upward momentum could trigger premature exhaustion.
Derivatives Volume Shrinks, Market Sentiment No Longer Aggressive
On the other hand, data from CoinGlass shows that market participants are starting to reduce their exposure to derivative instruments. Bitcoin derivatives trading volume in the last 24 hours fell 4.16%, totaling just $96.61 billion. This can be interpreted as a sign of caution. The lower the volume, the fewer market participants willing to gamble on futures contracts.
Open interest also decreased, falling 2.08% to $83.11 billion. This means many contracts were closed or left to expire, either due to profit-taking strategies or as a risk-averse measure. Even in the options sector, typically used by extreme speculators, volume plummeted by 10.02%. Only $5.49 billion was recorded changing hands, indicating that investors are skeptical of any major price movements in the near future.
Even more striking, the long/short ratio on Binance for the BTC/USDT pair is at 0.8437. This means that short positions, bets that the price will fall, outnumber long positions.
If more people are betting on the price going down, it means confidence in the continuation of the rally is starting to fade. So, even though the price is still rising slightly, the market forces behind it appear to be weakening.
Furthermore, a previous CNF report also revealed that over $9.4 billion of BTC moved onto exchanges in mid-July. A Glassnode heatmap at the time highlighted a resistance area around $107,000. Such a large transfer of funds to exchanges typically occurs when large holders are preparing to sell, not buy.
One analyst even suggested that this rally felt “cool” because it wasn’t supported by the usual surge of retail enthusiasm. If even retailers are reluctant to join the buying frenzy, is this really a healthy rally?
However, not all analysts are pessimistic. Michaël van de Poppe, a trader known for his aggressive predictions, actually predicts BTC will break a new record. He believes Bitcoin could reach $125,000 by the end of July, rise to $150,000 in the third quarter, and even reach $250,000 by the end of 2025. This is a bit optimistic, but that’s the nature of the market—there are always two sides to the coin.
At the time of writing, BTC was trading at about $118,725, up only 0.13% in the past 24 hours. The sideways movement over the past week further reinforces the impression that the market is searching for direction.
