Challenges Facing Key BTC Indicators
The analyst further points out that establishing a causal relationship between price and open interest remains challenging, as historical data shows that price volatility often drives changes in open interest levels rather than the other way around.
Additionally, the analyst noted that with the growth of the futures market and the adoption of Bitcoin, higher levels of open interest are expected in the coming years.
Aytekin believes another potentially misleading indicator is 'Profit Supply', which measures the overall network's profitability. This indicator is related to Bitcoin's nominal price and often leads to a significant surge in profitability above 95% during ATH periods.
However, Aytekin believes that if extreme profitability continues to trigger massive sell-offs, setting new highs will be a problem. Instead, he suggests considering how long these high profitability levels can be sustained and notes that historically, in broader market cycles, this situation can last up to a year.
Are reliable indicators suggesting that Bitcoin is overheated?
In contrast, the analyst highlights two indicators he believes are valuable for tracking Bitcoin market sentiment: funding rates and the spent output profit ratio (SOPR). Funding rates track the cost paid between long and short positions in the futures market and serve as a tool for identifying 'excessive' market optimism.
Aytekin believes monitoring this indicator provides better insights into market conditions than open interest. So far, he points out that funding rates have not indicated extreme market behavior.
The analyst revealed that the SOPR metric can clearly indicate profit trends, especially when smoothed using a 30-day moving average.
Aytekin emphasizes that profitability itself is not risky unless it aligns with supply changes in the market. CryptoQuant analysts revealed that current SOPR levels indicate that while the market shows signs of profitability, overheating symptoms have not emerged.
Meanwhile, Bitcoin is trading at $81,838, having risen 2.4% in the past day. This trading price is down 0.6% from the all-time high of $82,379 set earlier today.
At the time of writing, the market capitalization of this asset exceeds 1.6 billion dollars, with a 24-hour trading volume of 90.6 billion dollars.