Bitcoin has seen record inflows to hoarding addresses, indicating strong demand, but analysts on the chain warn that the rapid rise in prices has led to an overheated bull market with risks of selling by miners and traders.
Bitcoin has seen massive inflows to hoarding addresses, signaling record high demand according to chain analyst Julio Moreno. However, some indicators also suggest that the Bitcoin market is in an overheated phase.
Hoarding addresses are wallets that only receive BTC and never spend – indicating that investors are buying and holding Bitcoin. According to Moreno, inflows to these hoarding addresses have reached record levels, indicating extremely strong demand for Bitcoin.
However, Moreno also warned that prices have increased so quickly that some indicators are starting to signal an overheated bull market. The Bitcoin Bull-Bear Market Cycle Indicator noted that the market is in an overheated bull phase as prices reached $60,000.
Additionally, Bitcoin miners are overpaid at current price levels based on the Bitcoin mining hash bar. Miners receive block rewards and transaction fees to secure the network, but higher Bitcoin prices lead to very high rewards. A mining hash bar that is in an “overheated” zone suggests an unsustainably high income for miners, which may lead to selling pressure.
Additionally, traders’ unrealized profit margins are very high at 45%, which also shows risks of traders selling to take profits if prices stop rising.
While on-chain data shows strong build-up demand, short-term indicators reflect market conditions that may be overextended. The rapid rise in the price of Bitcoin in 2021 has led to unfavorable conditions, although the long-term bullishness remains intact, with investors steadily accumulating Bitcoin and holding it.
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