Bitcoin's price has broken through $120,000. Despite this astronomical rise, several on-chain indicators suggest that the current bull market is not overheating but rather indicates potential for continued growth.
Bitcoin Soars as On-Chain Data Indicates Bull Market Sustainability
Compared to the price peaks before March and December 2024, the current Bitcoin price surge exhibits different characteristics. In previous peaks, the Market Value to Realized Value (MVRV) ratio spiked above 2.7, reflecting high market speculation. However, the current MVRV ratio is only 2.2, indicating a relatively stable market environment.
Data from CryptoQuant shows that short-term holders (those holding for less than a month) currently make up only 15% of the market, significantly lower than the 30% seen during prior price peaks. This suggests limited inflow of new funds and a relatively cautious investor sentiment. Additionally, the Short-Term Holder Profit and Loss Ratio (SOPR) indicates that recent buyers are not actively selling, resulting in relatively low selling pressure.
The Miner Position Index (MPI) has also continued to decline, indicating that miners prefer to hold Bitcoin rather than sell, contrasting with the past phenomenon where rising prices prompted significant selling by miners.
Institutional Investors Driving Growth, Not Speculative Trading
CryptoQuant analysis indicates that the recent Bitcoin price increase is not driven by speculative trading but may be supported by strategic adoption by nations and corporations, suggesting a structurally different bull market cycle. Analysts emphasize that relying solely on historical patterns for on-chain data analysis is insufficient and requires deeper contextual interpretation. With no signs of overheating after breaking new highs, there is significant potential for further price increases in the medium to long term.
Exchange Balances Continue to Decline, Reducing Sell-Off Risks
Data from Santiment shows that despite Bitcoin's price rising nearly 20% since the low on June 22, traders have not been transferring large amounts of Bitcoin back to exchanges. Instead, holders are continuously moving Bitcoin to self-custody wallets. Over the past four months, exchange Bitcoin balances have decreased by 315,830 BTC, a drop of 21%; since July 2020, they have decreased by 1.88 million BTC, a decline of 61%. The ongoing decrease in exchange balances reduces the risk of large-scale sell-offs, indicating that long-term investors are more inclined to hold.
In conclusion, while Bitcoin's price has reached a historic high, multiple on-chain data indicators suggest that this bull market differs from previous ones, exhibiting higher sustainability and potential for long-term development. However, market risks remain, and investors should remain cautious.
