The Bitcoin market has been correcting itself for weeks after rising above $108,000. Investors are concerned about whether the market is cooling down or whether this correction marks the end of the bull run.
In fact, Bitcoin market cycles have often seen similar bottoms, followed by new upward momentum. Now, analysts are using crucial on-chain metrics to understand the current phase and direction of Bitcoin’s price.
According to research, seller profit margins decline as the 7-day SMA remains above 1 but trends lower. A dip below 1 often indicates market sentiment, with bounces following as selling pressure fades.
He also examined the Bitcoin Miner Attitude Index. This index tracks the behavior of miners, particularly their tendency to sell Bitcoin before market events such as halvings or peak prices.
The CPI trend indicates that there are no significant outflows from miners to exchanges, suggesting that major mining companies are holding onto their Bitcoin inventories.
Avocado said this shows confidence in Bitcoin’s long-term value despite short-term volatility. Expect occasional sell-offs to fund operating expenses.
The 7-day simple moving average of total network fees is another key indicator for CryptoQuant analysts. Transaction activity and on-chain engagement are measured here.
Avocado said that the lower network costs indicate a decline in trading activity and a period of market calm. Historically, low trading activity has preceded positive momentum, especially when other indicators agree.
Another key indicator, funding rates, has fallen. Funding rates, the cost of holding long or short-term Bitcoin futures, are used to gauge market sentiment.
Funding prices often recover once gloomy sentiment peaks and buyers return during bullish cycles.