By Nancy Lubale, CoinTelegraph
Compiled by: Deng Tong, Golden Finance
BTC prices have fallen 2.25% over the past 24 hours and are currently 16% below their all-time high of $73,835 reached on March 14.
Bitcoin/USD daily chart. Source: TradingView
Bitcoin prices are down 8.75% in the past 30 days and 5.5% in the past three months. Bitcoin prices have been trending lower in June, leading market analysts to wonder if the pioneer cryptocurrency has reached a “cycle top.”
Let’s look at some of the reasons why some analysts believe the Bitcoin bull run has peaked.
Bitcoin long-term holder inflation rate approaches critical threshold
Charles Edwards, founder of Capriole Investments, said many on-chain indicators suggest that Bitcoin’s failure to set new highs after two retests is a “sign of weakness.”
Edwards explained in his latest newsletter that the inflation rate for Bitcoin long-term holders (LTH) has been steadily increasing over the past two years.
According to Glassnode, the LTH market inflation rate measures the annual accumulation rate or distribution rate in addition to the amount issued to miners every day. A higher value indicates that as LTH holds less Bitcoin, they are increasing seller pressure.
At the top of a bull market, market inflation peaks above nominal inflation (2.0), “which typically marks a high threshold for a cycle top,” Edwards said.
“Today it was 1.9, we were too close to that for my liking.”
Bitcoin LTH inflation rate. Source: Gassnode
Bitcoin dormant traffic increases for three consecutive months
Another metric that helps determine market cycles and assess whether Bitcoin is bullish or bearish is Dormant Flow. It is an on-chain metric that measures the amount of coins being spent relative to the overall trend.
Additional data from Glassnode shows that Bitcoin’s dormancy Z-score has suddenly increased over the past 90 days.
Edwards observed that the metric reached a significant peak in April, indicating that tokens sold in 2024 were held for significantly longer periods on average. “The peak of this metric (the z-score) is typically seen three months later at the top of the cycle,” the analysts explained.
“Well, here we are three months later. Prices have simply declined, and the dormant Z-score peaks still retain a very similar structure to the 2017 and 2021 peaks.”
Bitcoin Dormancy Z-Score. Source: Glassnode
At its current value, the Dormant Flow Z-Score means that Bitcoin is overvalued relative to the sum of tokens being traded without volume support. This suggests that Bitcoin price may have hit a cycle top, which could also be bearish for the broader cryptocurrency market.
A surge in spending could be a top signal for Bitcoin
Finally, growing clusters and spikes in spending volume help indicate what Edwards calls “growing areas of risk.” Historically, when Bitcoin’s 7-10 year spending volume suddenly grows, it can be a signal of a cycle top.
Note also that the amount of growth in 2024 suggests that this cycle is progressing quickly.
“This chart is going to blow your mind and smack you in the face,” Edwards said in a July 2 X post.
“The entire history of this chart has been wiped out because of the massive amount of Bitcoin that has moved on-chain, 10x more than the previous high.”
The life cycle of Bitcoin is 7-10 years. Source: Glassnode
Edwards also noted that more than $9 billion worth of Bitcoin has been moved from addresses older than 10 years. He attributed the distribution to the recent moves by defunct cryptocurrency exchange Mt. Gox as it prepares to repay creditors later in July.
Bitcoin financial services company Swan shared a similar view, saying the market is concerned about the impact of Mt. Gox's 142,000 bitcoins (worth about $9 billion at current exchange rates).
Swan explained that while “many creditors are long-term holders with options, institutional ownership and tax considerations suggest that selling pressure will be gradual rather than sudden, even if all tokens are released to the market at the same time.”
In a follow-up X post, the firm added that continued government selling has increased supply-side pressure on Bitcoin.
Source: Swan
An earlier report from Cointelegraph showed that a cryptocurrency wallet labeled "German Government (BKA)" transferred 832.7 Bitcoin (about 52 million) in four transactions on July 2. According to Arkham Intelligence data, the wallet sent 100 BTC to Coinbase, 150 BTC to Bitstamp, and 32.74 BTC to Kraken.
Tracking the selling patterns of Bitcoin whales can provide investors with valuable clues about the price of Bitcoin, as large sell orders can foreshadow market tops.
