Realisation of Bitcoin's earnings has peaked
Soaring Bitcoin Approaches Resistance, Signaling Potential Correction
In an unprecedented rally, Bitcoin (BTC) surged to an all-time high of approximately $112,000 on May 23rd, surging by almost 50% from the lows seen in April. However, this upward trend has raised concerns among investors as crucial on-chain data from CryptoQuant indicates that 99% of Bitcoin's Unspent Transaction Outputs (UTXOs) are currently in profit. Historically, this level has preceded market peaks followed by sharp corrections.
The heightened profitability among Bitcoin holders is a cause for caution, according to CryptoQuant. The current macroeconomic uncertainties, particularly the uncertainty surrounding Trump's future economic policies, make it premature to declare a full-blown bull market. Analysts warn that a reversal in the UTXO profit ratio could trigger a chain reaction of sell-offs, as early buyers realize their gains and new investors are forced to sell at a loss.
Additional warning signals come from Glassnode. Their analysis reveals that the 14-day Relative Strength Index (RSI) has dipped to 25.1%, indicating declining demand in the spot market and waning interest from short-term investors. On the other hand, increases in open positions and funding rates suggest an uptick in speculative activity. However, Glassnode underscores that the Perpetual Cumulative Volume Delta (CVD) indicator is in a downtrend, suggesting that selling pressure is intensifying.
In the options market, signals are mixed: while the 25-Delta Skew remains stable, increases in open positions and volatility range suggest that investors might be hedging or engaging in profit-taking activities. Despite some recovery in liquidation conditions, this is mostly driven by short-term investors' activity, as evidenced by the increased short-term to long-term investor demand ratio (STH/LTH). The decline in the realized volatility of Bitcoin indicates limited investor excitement throughout the week.
Moreover, a slight decrease was observed in the number of active addresses, suggesting a slowdown in user activity following the intense interest seen in previous weeks.
Historically, Bitcoin market tops have occurred in cycles marked by distinctive patterns and key dates. Previous cycles show that Bitcoin typically approaches a peak approximately 161 days after a significant bottom phase lasting about 903 days. If this pattern holds true for the current cycle, the market top may materialize around October 2025, triggering subsequent profit-taking and price declines.
Ultimately, the combination of approaching major historical resistance, overextended momentum indicators, declining volume despite rising prices, waning demand after all-time highs, and on-chain metrics reflecting UTXO profit ratios and demand, creates a scenario favoring potential sell-offs or a market correction in the near term. Investors should closely monitor these trends in the coming weeks.
Additional Relevant Information:
Bitcoin's market tops have traditionally been identifiable through key metrics, such as the MVRV Z-score, which compares market value to realized value and adjusts for volatility. High Z-scores indicate Bitcoin is overvalued relative to its historical cost basis, often preceding a price decline. Additionally, the Pi Cycle Top Indicator, which signals market overheating when the 111-day simple moving average (SMA) crosses above twice the 350-day SMA, should be monitored closely. Volume trends, particularly on-balance volume (OBV) divergences, often signal weakening momentum and impending reversals. Bitcoin is currently approaching a critical resistance trendline that connects major peaks from 2017, 2021, and 2024-2025 around $113,000, which could mark a major top or a breakout point.
- During this period of heightened profitability, investors may want to consider the potential impact of Bitcoin's blockchain on their financing options, as an approaching critical resistance trendline near $113,000 could signal a market correction that might influence investing decisions.
- As the Bitcoin market shows signs of slowing down due to declining demand and intensifying selling pressure, it's worth exploring alternative investment opportunities within the finance sector, particularly those that align with emerging blockchain technologies, to mitigate market risks and ensure a more diversified portfolio.
