Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Despite Bitcoin’s recent push above $116,000—a three-week high achieved on Friday—the majority of its bull market indicators have shifted to a bearish stance, suggesting a notable cooling of market momentum. According to blockchain analytics platform CryptoQuant, eight out of ten of its proprietary Bull Score Index indicators are now flashing red for Bitcoin, prompting concerns about the asset’s short-term trajectory.
CryptoQuant’s Bearish Signals
CryptoQuant analyst JA Maartun stated on Thursday that “Momentum is clearly cooling” as the platform’s Bull Score Index predominantly signals bearish sentiment. Out of ten indicators, only two remain bullish: “Bitcoin demand growth” and “Technical signal.” The demand growth metric has indicated bullishness since July, while the technical signal tracks common technical analysis metrics.
The remaining eight indicators have all turned bearish. These include the MVRV-Z score (market value to realized value), profit and loss index, bull bear cycle indicator, inter exchange flow pulse, network activity index, stablecoin liquidity, trader onchain profit margin, and trader realized price.
The last instance of eight out of ten indicators turning bearish was in April, preceding Bitcoin’s drop to $75,000. Conversely, in July, the same number of indicators were bullish when BTC reached its previous peak of $122,800 this year. CryptoQuant’s overall Bull Score Index, which aggregates these metrics, has fluctuated between 20 and 30 throughout the current month as the market correction continues.
Conflicting Market Views
While CryptoQuant presents a cautious outlook, other indexes offer a more nuanced perspective. The CoinGlass Crypto Bitcoin Bull Run Index (CBBI), which evaluates nine metrics, currently stands at 74, indicating that the market is almost three-quarters into a bull run. However, only one of CoinGlass’s 30 bull market peak indicators, the altcoin season index, has yet flashed.
Augustine Fan, head of insights at crypto trading software provider SignalPlus, noted that crypto prices have largely treaded water recently. She highlighted that Bitcoin has been lagging both its peer group and traditional assets like equities and spot gold. Fan added that net buying momentum has slowed, with digital asset treasury buying falling substantially and centralized exchanges reporting low levels of new capital inflows, as “investors preferring to stay within the equity proxies.”
Bitcoin’s Recent Price Action
Despite the prevailing bearish indicators, Bitcoin saw a marginal recovery during early trading on Friday, climbing to over $116,000 for the first time in three weeks. This 1.5% daily gain places the asset just 6.8% shy of its all-time high. The current correction has also been notably shallower compared to previous market cycles, potentially offering a glimmer of resilience amidst the cooling momentum signals.
In summary, while Bitcoin’s price has shown recent strength, the underlying market health, as measured by a majority of CryptoQuant’s bull indicators, points to a significant cooling of momentum. This creates a mixed signal environment for investors, with some analysts advising a more defensive stance given the challenging short-term outlook and general risk asset trends.
