Analyst Suggests Bitcoin Recovery Indicates a Stronger Bull Market Without Excessive Growth

In contrast to previous market surges, the recent bounce in Bitcoin (BTC) – rising from a potential cycle low of $74,508 on April 6 to just over $100,000 at the time of this writing – demonstrates a healthier price trajectory.

Current Bitcoin Rally Not Indicating Overheating

A contribution by avocado_onchain in a recent CryptoQuant Quicktakes post notes that last year’s BTC bull run, which led to multiple all-time highs (ATHs) for the cryptocurrency, was marked by significant spikes in both Binance market buy volume and funding rates.

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It’s worth noting that abrupt increases in funding rates were often closely followed by sharp price corrections fueled by overheating. Here, overheating is defined as excessive bullish leverage in the futures market that inflates the cost of long positions, indicating overly optimistic sentiment that tends to precede market adjustments.

The accompanying chart highlights these corrections instigated by excessive leverage in BTC futures. Specifically, boxes 1 and 2 depict rapid increases in Binance funding rates that were initially linked to price spikes, followed by extended periods of price correction.

However, the current rally seems to be evolving differently. The ongoing rebound in Bitcoin, as observed by avocado_onchain, is happening without any signs of overheating in funding rates. In fact, Binance market buy volume is showing a downward trend – as illustrated in box 3 of the chart – which stands in stark contrast to previous bullish cycles.

The analyst believes these factors indicate a more robust rally, unlike previous bull runs that were characterized by heated funding rates and sudden corrections that dampened investor sentiment. The current rally has instead seen relatively stable funding rates, signifying a more cautious and sustainable market environment.

Despite short-term price variations, market buy volume has consistently trended upwards since 2023, as indicated by the yellow arrow on the chart. The analyst observes:

This suggests that the buying mood remains positive for further upward movement, indicating it is still too early to contemplate an exit. While we cannot specify exactly when Bitcoin will surpass its previous all-time high, the current on-chain and market indicators remain very promising.

Additional Indicators Suggest New ATH

In addition to stable funding rates and positive market buy volumes, BTC is also displaying multiple other favorable indicators suggesting a new ATH for the premier digital asset in the near future.

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For instance, on-chain metrics reveal that long-term holders are holding their positions, even while BTC hovers near its former ATH of $108,786 set in January. Such behavior implies these investors are expecting continued upward movement.

Nonetheless, analysts urge caution against overly bullish expectations, stating that Bitcoin could still be some distance from encountering a genuine supply shock. As of now, BTC is priced at $102,393, reflecting a 1.4% decline over the last 24 hours.