Amid Bitcoin’s ongoing pursuit to reach a six-figure all-time high (ATH), a CryptoQuant analyst known as aytekin has shared an in-depth analysis on effective tools for assessing Bitcoin’s market temperature. He focuses particularly on distinguishing useful metrics from potentially misleading ones.
Aytekin points out that investors frequently grapple with questions about Bitcoin’s capability to hit new peaks and the timing of potential market tops. To help navigate these concerns, he identifies two charts that he considers less reliable for gauging market sentiment: “open interest” and the “supply in profit” metric.
The analyst explains that establishing a causal link between Bitcoin’s price and open interest levels is challenging. Historical data suggests that price fluctuations typically drive changes in open interest rather than the other way around. With the growth of futures markets and wider adoption of Bitcoin, higher levels of open interest are anticipated in the coming years.
Another metric aytekin views as potentially misleading is the “supply in profit,” which assesses overall network profitability. This metric frequently correlates with Bitcoin’s nominal price, leading to extreme spikes exceeding 95% during ATH periods. Aytekin warns that consistently high profitability could trigger major sell-offs, making it difficult for Bitcoin to achieve new highs. Instead, he advises paying attention to how long these high-profitability levels persist, noting that they have historically lasted up to a year within broader market cycles.
Conversely, aytekin highlights two metrics he finds valuable: the funding rate and the Spent Output Profit Ratio (SOPR). The funding rate tracks the cost exchanged between long and short positions in futures markets and helps identify extreme market optimism. Aytekin believes monitoring this metric provides better insights into market conditions than open interest. He notes that current funding rates do not indicate extreme market behavior.
The SOPR metric clarifies profitability trends when smoothed using a 30-day moving average. Aytekin emphasizes that profitability alone is not inherently risky unless it aligns with supply movements in the market. He reports that current SOPR levels suggest the market is showing signs of profitability but does not exhibit symptoms of overheating.
Meanwhile, Bitcoin has been trading at $81,838, up by 2.4% in the past day. However, this price marks a 0.6% decline from the asset’s ATH of $82,379 reached earlier today. As of the latest updates, Bitcoin’s market capitalization stands above $1.6 billion, with a 24-hour trading volume of $90.6 billion.
