Is Bitcoin in an Overheated Bull Market?

Bitcoin has seen massive inflows into accumulation addresses, signalling record high demand according to on-chain analyst Julio Moreno. However, some indicators also suggest the Bitcoin market is in an overheated phase.

Accumulation addresses are wallets that only receive BTC and never spend – indicating investors are buying and holding Bitcoin. According to Moreno, inflows into these accumulation addresses have reached record highs, showing extremely strong demand for Bitcoin.

However, Moreno also warned that prices have increased so quickly that some indicators are beginning to signal an overheated bull market. The Bitcoin bull-bear market cycle indicator has flagged that the market is in an overheated bull phase, as prices reached $60,000.

In addition, Bitcoin miners are being overpaid at current price levels based on the Bitcoin mining hash ribbon indicator. Miners receive block rewards and transaction fees for securing the network, but higher Bitcoin prices result in very high rewards. The mining hash ribbon being in the “overheated” zone suggests unsustainably high miner income, which could lead to selling pressure.

Moreover, traders’ unrealized profit margins are very elevated at 45%, also indicating risks of traders selling to take profits if prices stop rising.

While on-chain data shows strong accumulating demand, short-term indicators reflect market conditions may be overextended. The rapid price increase of Bitcoin in 2021 has led to frothy conditions, though the long-term bullish case remains intact with investors steadily accumulating Bitcoin and holding.

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