Is the Bitcoin Bull Market Entering a Cooling Period? CryptoQuant: Buying Pressure is Gradually Diminishing, with the Next Key Factor Being Interest Rate Cuts
After Setting a Historical High, Bitcoin Shows Signs of Cooling Down
After reaching an all-time high, Bitcoin’s upward momentum appears to be cooling. Analysis firm CryptoQuant points out that weakening upward momentum, stagnating stablecoin inflows, and profit-taking behavior are accumulating market pressure. Facing the current “bull market cooldown,” despite the absence of a definitive end signal, the market may weaken further without new positive drivers.
Cooling Bull Market: Bull Score Index Decline Indicates Weakened Momentum
According to a recent report by CryptoQuant, after Bitcoin set a historical high of over $123K a few weeks ago, the market seems to have entered a “bullish cooldown” phase. The Bull Score Index, which measures market momentum, has dropped from a high of 80 to 60, reverting to early July levels. Although it remains in a slightly bullish range, it indicates that momentum is waning.
If the index falls further below 40, it could revert to the weak trend seen from February to April of this year. CryptoQuant indicates that this cooldown is related to seasonal factors and profit-taking by investors, which, although not driven by panic selling, warrants vigilance.
Stablecoin Liquidity Flashing Red: Funding Drought Weakens Buying Power
One of the key drivers of Bitcoin’s rise has been the momentum of off-exchange funds brought in by stablecoins. However, CryptoQuant warns that the current stablecoin liquidity indicators have turned red, suggesting that new capital inflows are slowing down.
Bull Score Signals: The more green blocks on the chart, the more the market tends to rise, while red blocks indicate the opposite.
Although USDT’s market cap has increased by $9.6 billion over the past 60 days, this growth rate has fallen below previous levels, indicating that liquidity has stagnated. For the market, this means that buying momentum is drying up, and the strength to push prices higher will significantly decrease.
At the same time, CryptoQuant has also found that the on-chain profit margin (Trader On-chain Profit Margin) has turned red, meaning that most investors in the market have already realized profits and no longer hold significant unrealized gains.
The analysis team stated: “This is a typical profit-taking phase.”
While market sentiment has not turned pessimistic, new positive catalysts are needed to sustain the upward momentum; otherwise, the market is likely to consolidate or correct in the short term.
CEO: Institutions Rewrite Market Rules, High Leverage Risks Increase
Previously, CryptoQuant’s CEO Ki Young Ju candidly stated that the Bitcoin market is different from past cycles, with institutional participation rendering many of his predictions ineffective:
“In the last cycle, whales sold to retail. This time, old whales are selling to new long-term whales. Institutional involvement is more extensive than I imagined, and now there are more holders than traders.”
He indicated that market structure is changing, and market volatility could become more resilient due to institutional participation, warning high-leverage traders about risks: “Using more than 5x leverage, your likelihood of being liquidated within 24 hours will increase exponentially.”
For example, with 50x leverage, the survival rate for continuous trading over a week is only 0.000612%.
Next Wave of Market Key: Waiting for Fed to Release Positive News?
Finally, CryptoQuant’s research director Julio Moreno expressed concern that the market may need new positive factors to sustain the bullish trend, with the most anticipated being: the U.S. Federal Reserve (Fed) potentially lowering interest rates in September.
If this policy materializes, it would help ease the funding environment, injecting fresh capital into risk assets and potentially serving as the next catalyst for pushing Bitcoin higher. Before this, investors may need to prepare psychologically for a period of consolidation or even a pullback.
Risk Warning
Investing in cryptocurrencies carries a high level of risk, and their prices may fluctuate dramatically, resulting in the loss of all principal. Please carefully assess the risks.
