Warning: Bitcoin Enters the "Overheated Zone" - Opportunity or Trap?

Bitcoin continues to trade below the record high set earlier this month, hovering around the $119,000 mark. Although the price movement over the past week has only shown a modest increase of 0.3%, analysts believe the market may be approaching a turning point. Price fluctuations moving sideways do not hinder the overall bullish outlook, but on-chain indicators currently suggest that caution is warranted. One such indicator comes from Arab Chain, a QuickTake collaborator of CryptoQuant, who has warned about the potential overheating in the current Bitcoin market structure. The upward trend of Bitcoin's price continues, but there are warning signs. In a recent post, the analyst highlighted the behavior of the Bullish and Bearish Market Cycle Indicators, which are currently in the zone usually associated with strong bullish trends. However, the fact that this area is close to the region known as the "overheated bull market" has raised concerns about a potential correction. The historical pattern of the indicator shows that this area often occurs before prices cool down, prompting investors to consider profit-taking strategies.

Arab Chain notes that although there is a bullish structure, the indicator approaching overbought territory may cause speculators to close positions. "The proximity of overbought regions indicates that this is not the right time to buy in," the analyst explains. This observation reflects the general sentiment that market participants may choose a wait-and-see approach, predicting a better opportunity to re-enter the market after a correction. Additionally, while the 30-day to 365-day moving averages continue to support the ongoing uptrend, they can also signal that a short-term peak is forming unless broken by new market catalysts. Retail investors' interest remains muted as institutional demand rises. Supporting this view, another analyst from CryptoQuant, Burak Kesmeci, emphasized the role of institutional activity in driving the current cycle. Kesmeci explained that retail investors have reduced their Bitcoin holdings since the beginning of 2023, while large investors have increased their holdings, particularly from the start of 2024 onward. "This time, the source of the Bitcoin price increase does not come from retail investors — but rather the big players are the ones leading the charge," he wrote. This accumulation of large-volume wallets, which may be related to institutions or ETFs, indicates a change from previous cycles that were dominated by retail investors. Kesmeci also pointed out data from Google Trends showing that the level of interest in searching for "Bitcoin" is still low compared to previous price rallies. The absence of widespread excitement among retail investors contrasts with the strong public engagement during the Bitcoin price surge in 2021. According to Kesmeci, this period of stagnation may indicate that retail investors have not yet flooded into the market — a historical phase signaling the final stretch of the bull cycle. "The crowd has yet to awaken," he noted, adding that "smart money is currently on stage — and most people are still watching from the outside." $BTC {spot}(BTCUSDT)