Bitcoin Enters Bullish Cooldown Phase

Bitcoin has shown signs of consolidation or slight downside risk after hitting an all-time high of over $123,000 last month, according to analysis from CryptoQuant. The firm reported that Bitcoin has entered a 'bullish cooldown' period, with the Bull Score Index dropping from 80 to 60. While market conditions remain generally positive, the momentum appears to be slowing. The Bull Score Index assesses Bitcoin's market strength using various on-chain metrics. Scores nearing 100 indicate strong buying activity and positive sentiment, while scores closer to zero signal heightened selling pressure. At its current ranking of 60, the index suggests a broadly bullish market, albeit with a reduction in momentum. CryptoQuant noted that the decline in the index is indicative of profit-taking following Bitcoin's recent price rally and a typical seasonal slowdown in trading during summer. If Bitcoin's price continues to weaken, the indicator may enter negative territory, potentially lowering the Bull Score Index below 40, which would mark the first bearish conditions since April 2023. What is causing Bitcoin's cooldown? CryptoQuant attributes the diminishing momentum to various on-chain indicators. For one, stablecoin liquidity has stalled and turned red, indicating that new capital inflows into the market are declining, which often foreshadows weakening buying power. In the past two months, Tether (USDT) liquidity increased by $9.6 billion, but its growth rate has since slowed down. Moreover, the on-chain profit margin signal has also turned red, showing that traders have realized significant gains and are no longer benefiting from large unrealized profits, a typical indicator of profit-taking behavior. According to CryptoQuant, new bullish catalysts are necessary to reignite the uptrend. When asked about potential catalysts, Julio Moreno, head of research at CryptoQuant, mentioned that a key factor could be a reduction in interest rates by the U.S. Federal Reserve at their upcoming meeting in September, something many market participants are anticipating. Currently, Bitcoin is trading around $116,340, representing a 0.8% increase over the past 24 hours, according to The Block’s BTC price page.