Bitcoin's bounce on Tuesday may offer a brief respite for investors, but experts are warning that a deeper "cooling-off phase" could be in play.
A combination of declining on-chain activity and sustained institutional outflows suggests that the market may be entering a more cautious period after a powerful run to record highs.
On-chain data reveals a significant slowdown in network activity, which aligns with Bitcoin's recent price pullback, Glassnode cautioned in an official Telegram channel on Tuesday.
The monthly average of change-adjusted transfer volume has declined 13% from $26.7 billion to $23.2 billion.
If this trend continues, and the metric breaks below its yearly average of $21.6 billion, it would “confirm weakening speculative activity and signal a broader contraction in demand,” Glassnode wrote.
Bitcoin is currently trading at $111,300, up 2.52% from Monday’s low of $108,550, according to CoinGecko. It's still down more than 10% from its August 14 high of $124,128.
Bitcoin’s slowdown coincides with a period of elevated sell-side pressure from long-term holders.
The realized profit from these investors is the second most significant compared to prior cycles, which is a “strong signal that the market is in a late-stage phase,” Glassnode wrote in a separate post on X.
"It looks like we’re entering a cooling-off phase that could last through September," Georgii Verbitskii, a derivatives trader and founder of DeFi platform TYMIO, told Decrypt.
Spot exchange-traded fund outflows for Bitcoin, along with heightened macroeconomic risk, are exacerbating bullish sentiment, Ecoinometrics, a crypto macro research newsletter, wrote on Tuesday.
“As of Friday, our flows-to-price model put the expected price at $107,000, with a risk of falling below the psychological $100,000 level if outflows persist.”
TYMIO’s Verbitskii shares a similar view that a $100,000 target is “on the table,” despite his long-term bullish outlook.
Combined with Bitcoin’s declining fundamentals, the macroeconomic uncertainty and rate cut expectations have market analysts exercising caution.
September, in particular, has returned an average of -3.77% in the past 12 years, while the third quarter has historically yielded negative returns, CoinGlass data shows.
With potential for further downside, Verbitskii cautioned against opening new long positions at current levels and suggested adopting a “wait and see” approach.
“Long positions only make sense if we reclaim and hold above $118,000."
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