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The cryptocurrency market, led by Bitcoin, has often followed a pattern of alternating growth and decline cycles, reflecting investor sentiment and market fundamentals.
Since the beginning of the current bull cycle in January 2023, Bitcoin has demonstrated substantial gains in both price and market duration. Increased capital inflows from new investors have supported this growth and existing participants are reinvesting their profits.
However, recent indicators suggest that the market may now be entering the latter stages of this cycle, raising questions about what lies ahead for Bitcoin and the broader crypto market.
Key Indicators Point to Cautious Optimism
A significant metric supporting this observation is the percentage of Bitcoin traded within the past month based on realized market cap – UTXO, which currently sits at 36%, according to a recent analysis shared by a CryptoQuant analyst known as Crypto Dan.
Bitcoin realized market cap – UTXO. | Source: CryptoQuant
In the analysis, Dan reveals that while this figure remains lower than peak levels observed in previous bull cycles, its downward trajectory suggests that the market is “progressing toward its cycle peak.”
Dan anticipates that this peak could occur sometime between Q1 and Q2 of 2025. However, rather than a single explosive surge, historical trends indicate that the ratio could experience sharp increases two to four more times before the cycle concludes.
This pattern typically signals market overheating, followed by a subsequent correction or bear cycle. Dan further highlighted that while the market still holds potential for gains, a conservative approach to risk management is advisable.
Historically, late-stage bull cycles have been marked by increased volatility, as profit-taking begins to influence market behavior. Dan wrote:
Nevertheless, from a conservative standpoint and with risk management in mind, caution is advised. For this reason, I am planning to gradually sell my holdings.
Another critical observation from on-chain data is the relationship between short-term traders and long-term holders. Historically, a sharp increase in short-term trading activity often precedes a market correction.
Traders who entered the market during recent price rallies may begin to sell off their holdings, leading to temporary downward pressure on prices. Conversely, long-term holders often remain resilient during these periods, providing a stabilizing force in the market.
Bitcoin Sees Recovery As The New Year Begins
After weeks of struggling and remaining below $100,000 in the last month of 2024, Bitcoin appears to have now resumed its bullish momentum as the first month of 2025 commences.
Although, BTC entered the new year with a price below $95,000. However, a few days later, the asset continued its upward momentum, reclaiming the $100,000 price mark to currently trade at a price of $101,624.
At the time of writing, BTC recorded a 3.9% increase in the past day bringing its price closer to its recently established all-time high above $108,000 last month.
Featured image created with DALL-E, Chart from TradingView
