Are signs of a bull market on the horizon?

Analysts warn that Bitcoin may be heading for a correction, as expectations of interest rate cuts will not prevent profit-taking.

According to CryptoQuant analyst Axel Adler Jr., the current market may be entering the final stages of a bull market, characterized by a decrease in investors' appetite for risk.

Adler cited charts for Bitcoin's NUPL and MVRV technical indicators, noting that the 30-day simple moving average, which exceeded 1.9 in March and December 2024, now forms lower peaks, indicating that shareholders are actively selling, putting downward pressure on the market.

However, despite investors continuing to take profits, the additional profit they make compared to their cost basis (i.e., the marginal premium) with each price increase is increasingly diminishing.

Based on this observation, and considering the two expected interest rate cuts by the Federal Reserve this year, Adler Jr. anticipates that Bitcoin will see two additional price increases during this cycle, but selling pressure will eventually exceed demand, leading to a market correction.

At the same time, Marcus Thielen, an analyst at Matrixport, expressed similar concerns about the market. He pointed out that Bitcoin's recent drop below the key technical support level of $112,000 has changed market sentiment. While many optimistic voices remain, the previous cautious expectations are gradually proving to be accurate.

Analysts believe that this decline is partly due to the ongoing seasonal weakness that began in August, and partly due to the macroeconomic uncertainty resulting from downward revisions of labor market data. Thielen also noted a similar situation last year, when the Federal Reserve unexpectedly cut interest rates by 50 basis points due to market pressures.

At the same time, the market has already priced in two interest rate cuts, with the first likely to occur in September. However, until macroeconomic and market fundamentals improve, risk assets, including Bitcoin, are likely to remain weak.

In summary, whether it concerns the divergence of technical indicators, changes in market sentiment, or constraints of the macroeconomic environment, the market signals a potential risk window. While the expectation of interest rate cuts provides some relief, profit-taking and selling pressure from investors could stimulate the market. Therefore, investors should exercise caution and manage their risks effectively.

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