Bitcoin (BTC) Market Correction: What On-Chain Metrics Reveal About the Bull Cycle

The Bitcoin market has been experiencing a phase of correction in recent weeks following its recent surge beyond $108000. This decline has led to growing concerns among investors about whether the market is entering a prolonged cooling-off period or if this correction signifies the end of the bull cycle.

Bitcoin market has been experiencing a phase of correction in recent weeks following its recent surge beyond $108,000. This decline has led to growing concerns among investors about whether the market is entering a prolonged cooling-off period or if this correction signifies the end of the bull cycle.

However, historically, such phases have been common in Bitcoin’s market cycles, often followed by periods of renewed upward momentum. Analysts are now turning to key on-chain metrics to provide insights into the current phase and its implications for Bitcoin’s price trajectory.

The Good, The Bad, And The Ugly Of Bitcoin’s Recent Price Action, According To On-Chain Analysis

The market remains within a broader bull cycle, according to a recent analysis by a CryptoQuant analyst known as Avocado Onchain. Using on-chain indicators such as the Adjusted Spent Output Profit Ratio (SOPR), Miner Position Index (MPI), and funding rates, the analyst outlined the current state of Bitcoin.

“Bitcoin is still in a bull market judging by the key on-chain indicators,” the analyst stated.

The SOPR (7-day Simple Moving Average) remains above 1 but is trending downward, indicating reduced profit margins for sellers. This metric often acts as an early signal of market sentiment shifts, with drops below 1 historically triggering rebounds as selling pressure subsides.

“SOPR is still trending down, indicating lower seller margins. Drops below 1 usually lead to market recoveries as selling pressure gets absorbed.”

The report further analyzed Bitcoin’s Miner Position Index (MPI). This index measures miner behavior, particularly their tendency to sell Bitcoin in anticipation of significant market events, such as halving cycles or peak price levels.

“Miners are still not selling into the market heavily. Large mining operations tend to sell in smaller intervals to cover operational costs, even in bull markets. However, the MPI shows no large outflows from miners to exchanges.”

Avocado added that this indicates confidence in the long-term value of Bitcoin, even as short-term volatility persists.

Another important indicator highlighted by the CryptoQuant analyst is total network fees, measured using a 7-day Simple Moving Average (SMA). This metric reflects transaction activity and overall on-chain engagement.

“Transaction activity seems to be cooling off for now. The 7-day SMA of total network fees is down significantly from the recent highs. Such periods of lower transaction activity have historically preceded periods of renewed bullish momentum, especially when other indicators also support this trend.”

Finally, the analysis touches upon Bitcoin funding rates and their implications for market sentiment and short-term price movements.

“Funding rates have shown drops from recent highs. These drops usually indicate increasing pessimism among short-term traders or market participants engaging in leverage. Historically, during bull cycles, sharp drops in funding rates have been followed by short-term market recoveries as pessimism reaches an extreme point and buyers return to the market.”

The recent drops in funding rates, combined with other on-chain indicators, could present buying opportunities for long-term investors, especially during periods of heightened market pessimism, as suggested by the analysis.