The risks behind the Bitcoin rise: weakening market momentum and signals of overvaluation

The price of Bitcoin (BTC) continues to rise, having now surpassed $120,000, setting a new historical high, with the current price at $120,779.1. The support level is around $111,591, and the Parabolic SAR indicator shows strong support. At the same time, stablecoin reserves on the exchange have dropped to their lowest point in months, indicating increased market confidence and a rise in Spot buying momentum.

The decline in stablecoin reserves indicates strong investor demand

According to the latest data, the ratio of stablecoins on the exchange has dropped to its lowest level, reflecting that the liquidity of stablecoins available for purchasing Bitcoin is being rapidly depleted, indicating strong investor demand in the market. This phenomenon suggests that the purchasing power of stablecoins is decreasing, and if the market lacks new capital inflow, it may limit the further rise of Bitcoin.

Is the rise of Bitcoin too fast?

Despite the continuous rise in Bitcoin's price, the Spot Volume Bubble Map shows a cooling trend in market trading activity. The shrinking bubble sizes and declining trading volume indicate that market momentum may be weakening. Although the price is still rising, the number of participants is gradually decreasing, which lays the groundwork for potential market weakness. If trading volume does not rebound quickly, Bitcoin's upward momentum may lose support, leading to sideways consolidation or slight pullbacks.

Is it close to the market top?

The NVT (Network Value to Transactions ratio) and NVM (Network Value to Metcalfe's Law ratio) have both surged significantly, increasing by 88.21% and 25.55% respectively, indicating a notable divergence between market capitalization and trading volume. These metrics typically suggest market overvaluation during rapid rises, as the pace of price increase far exceeds the actual usage of the network. Historical data shows that such imbalances often foreshadow corrections or consolidation phases in the short term. Therefore, although market sentiment remains bullish, these valuation metrics suggest that Bitcoin may have entered an overheated zone, and traders need to prepare for a rebalancing of price and network utility.

Why do miners hold coins at new highs instead of selling?

The phenomenon of miners holding onto their coins without selling is also worth noting. The Miner Position Index (MPI) has significantly dropped by over 142%, falling to -0.70, which indicates that miners are greatly reducing their outflow. Typically, when prices rise, miners will increase their selling volume, but the current trend shows that miners may expect prices to continue rising. While this trend supports bullish sentiment, it also puts pressure on buyers entering the market later, as a sudden market reversal with miners starting to sell could lead to a sharp decline in prices.

Even though the bulls are dominant, can the weak trend continue?

Although the bullish market sentiment is evident, with +DI at 33.12 and -DI at 11.73, the ADX (Average Directional Index) is only 19.70, indicating a weak market trend strength. While bulls dominate the market, the lack of strong trend support may lead to insufficient momentum for the uptrend. If the ADX does not rise, the existing upward trend may stagnate. Therefore, traders should remain cautious, especially when the trend strength has not caught up with the price momentum.

Will Bitcoin continue to rise or enter a consolidation period?

The rise of Bitcoin is attributed to strong investor demand, reduced selling pressure from miners, and the inflow of spot funds. However, the high NVT/NVM ratio, cooling trading volume, and insufficient trend strength indicate that there are certain risks in the market. If market participation and trend momentum do not recover quickly, Bitcoin may face consolidation. Although buyers still dominate in the short term, if the market inflow is insufficient and there is no further confirmation from a technical standpoint, the current rise may face pressure.

Summary:

The continuous rise of Bitcoin is driven by strong market demand and miners holding their coins in observation, but signals of overvaluation, cooling trading volume, and weak trend strength suggest that the market may enter an adjustment period. The next few days will be a crucial moment to determine whether Bitcoin can break through new highs or face a short-term consolidation. Traders need to closely monitor market liquidity and technical changes, and ensure proper risk control.