Cryptocurrency analysis firm CryptoQuant reported that Bitcoin has entered a short-term consolidation or mild downside risk phase, with a pause in the market’s upward momentum.
According to the company’s report, the market entered a “bullish break” after Bitcoin reached an all-time high of $123,000 in June.
CryptoQuant noted that its Bull Score Index, which it uses to measure market strength, fell from 80 to 60. While this decline suggests the overall outlook remains positive, it suggests market momentum is beginning to weaken.
“Bitcoin has entered a pause period in the bull market. The decline in the index reflects both profit taking and the seasonal decline in trading volume seen during the summer months,” the report stated, warning that a drop below 40 could signal a bear market for the first time since April 2023.
CryptoQuant noted that on-chain indicators also confirmed this weakening. The stagnation of stablecoin liquidity, in particular, suggests a decline in new capital inflows into the market. While Tether (USDT) liquidity increased by $9.6 billion over the past 60 days, this growth has reportedly slowed and is now below trend.
Furthermore, the on-chain profit margin signal has turned red, indicating that investors have made significant profits recently and that unrealized profits are now decreasing. This signals a classic period of profit-taking.
The report stated that Bitcoin needs new catalysts to continue its upward trend. When asked what this catalyst might be, CryptoQuant Research Director Julio Moreno responded:
“The Fed’s interest rate cut at its September meeting, a development that markets have been waiting for a long time, could be a strong upward catalyst.”
*This is not investment advice.