These Indicators Are Signaling a Possible Correction in BTC’s Price: CryptoQuant

Is Bitcoin Overheating? A Possible Correction on the Horizon

As Bitcoin (BTC) surged to $64,000, on-chain indicators are sending out warnings that the cryptocurrency may be overheating. This could signal an imminent correction in the market, according to a recent report from CryptoQuant.

The report highlights the increasing traders’ unrealized profit margin and the high costs associated with opening new long positions in the perpetual futures markets as indicators of a potential pause or correction in BTC’s price.

The Rally Continues

Bitcoin has experienced a remarkable rally this week, with prices surging by over 25%. The bulls have been in control, propelling BTC to levels last seen in November 2021. After climbing from under $52,000 to over $60,000, Bitcoin is currently trading at $62,600, following a slight pullback from $64,000.

The surge in price has been primarily driven by increased demand from U.S. investors, as evidenced by the rise in the Coinbase premium index to 0.13%, the highest level since mid-February. Institutional investors have also been accumulating BTC, with holdings reaching 3.975 million, a level not seen since July 2022.

Further supporting the bullish sentiment is the influx of fresh capital into the Bitcoin market, with short-term holder realized capitalization increasing by 10% from October 2023 levels. This influx now represents 35% of the total capital invested in the network.

Bracing for a Correction

Despite the strong demand for BTC, analysts warn of a possible correction in the near future. The current price exceeds $56,000, reaching the red Metcalfe Price Valuation Band, a historically significant resistance level. Additionally, the cost of opening new long positions in the perpetual futures markets has risen, while traders’ unrealized profit margin is nearing a level that could trigger a correction.

While the Miner Profit/Loss Sustainability metric suggests that Bitcoin’s price is not overheated, miners are still underpaid compared to earlier in January when BTC was valued at $38,000.