Overheating in Bitcoin (BTC) Market Less Severe Than Past Correction Phases

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.