The cryptocurrency market is cooling off after a brief period of short-term overheating. Unlike prior cycles, CryptoQuant believes that the current overheating is smaller in scale and duration.

This means that Bitcoin could face a limited short-term dip in the near future.

Crypto Market Cools Off

The data focuses on the proportion of Bitcoin held for just 1 day to 1 week – an important metric that hints at market froth. While previous corrections in March-October 2024 and January-April 2025 followed more intense and prolonged overheating phases, the current one appears less severe and shorter in duration.

Given that the recent price uptick was relatively modest, CryptoQuant expects any near-term correction to be milder and shorter-lived. The analysis stated that this is part of a healthy cycle. A potential uptrend could emerge in the second half of 2025, especially if macroeconomic conditions and market sentiment turn favorable. Overall, the findings point to temporary consolidation rather than a full-blown downturn.

Bitcoin is currently changing hands at $118K. But the recovery to this level has prompted long-term holders to offload some of their stash. This is similar to past distribution cycles. Simultaneously, short-term holders are also facing shrinking gains.

To top that, Matrixport also warned of a possible pause in Bitcoin’s rally as traders face key macro events, including Fed decisions and a White House report. Historical weakness in August and September may trigger profit-taking and sideways action, even as long-term momentum remains positive.

Bullish Setup Intact

Amid signs of a temporary market cooldown, Bitcoin Vector revealed that Bitcoin is currently testing a key resistance level. Despite this, the overall structure remains bullish but lacks strong momentum. As such, a confirmed breakout above $120.5K would validate the continuation of the upward trend, while $112.5K serves as critical support on the downside.

As long as Bitcoin holds this range, pullbacks may present buying opportunities.

Bitcoin (BTC) is well within a bull market, but certain metrics suggest that the cryptocurrency may have reached a short-term top. This means that BTC may experience a significant price correction before another rally ensues.

A report from the market analytics platform CryptoQuant revealed that the metrics that appear to be overheating are those pertaining to Bitcoin’s demand growth. Regardless, Bitcoin’s overall conditions remain bullish, and the CryptoQuant’s Bull Score Index is at 80. Historical data shows BTC has continued to rally, provided the index remains above 50.

Demand Metrics Are Overheating

CryptoQuant analysts report that BTC balances held by whales have increased by 2.8% over the past month. They also estimate Bitcoin’s demand growth to be at 229,000 BTC within the same time frame. This figure is close to the demand growth recorded in December 2024 at 279,000 BTC when the cryptocurrency surged past $100,000 for the first time.

Such paces often precede a slowdown in whale accumulation, and as analysts always say, BTC needs strong demand to sustain a rally.

Additionally, the Bitcoin Traders’ Unrealized Profit Margin has approached a level that often indicates potential resistance for prices. According to historical data, bitcoin’s price surge tends to slow down whenever the metric nears 40% or crosses below its 30-day moving average, which is currently at 19%.

At the time BTC rallied past $111,000 last week, the margin hit 32%. This means it got close to 40%, which is the level marked for overheating.

Bitcoin Falls Below $104K

Analysts believe $120,000 could be the next major resistance level for BTC if it continues to rally. This is because $120,000 is the upper band of the Traders’ On-chain Realized price – here, the unrealized profit margin sits at 40%. Historical data indicate that this upper band has consistently served as a key resistance during bull markets.

While BTC still faces the possibility of a continued rally, the asset had fallen below $104,000 at the time of writing. Data from CoinMarketCap showed BTC was down 2% in 24 hours, tumbling from the $105,000 level.

Meanwhile, analysts have revealed that BTC investors have been realizing some profits following the recent price surge, but at moderate levels compared to past markets. Hence, there is no evidence to suggest that the bull cycle is ending; in fact, market conditions indicate continued strength in bitcoin’s upward trajectory.

BTC Holds Key Support After Rejection From New ATH

Bitcoin is currently trading around $107,750 after a volatile week that saw prices hit a new all-time high near $112,000. The daily chart shows BTC pulling back from overbought conditions but holding firmly above the 34-day EMA at $100,886—a level that has consistently acted as dynamic support during this uptrend.

Price remains well above the 50, 100, and 200-day SMAs, confirming a strong bullish structure. The key horizontal support at $103,600—now reclaimed—is another crucial zone. This level previously acted as a resistance ceiling during the March-April range and now serves as a potential launchpad if BTC consolidates above it.

Volume appears to be declining slightly on the pullback, which may suggest this is a healthy retrace rather than a reversal. As long as Bitcoin maintains above the $103,600–$105,000 zone, bulls remain in control. A deeper correction would find initial support around the 34 EMA and then the 100 SMA near $91,000.

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For now, the bullish trend remains intact. However, rejection at $112K and slowing momentum call for caution. A weekly close above $105K would confirm strength, while a break below $103K could trigger short-term weakness.

Featured image from Dall-E, chart from TradingView