Bitcoin Price Temperature Surges 17.94% Raising Overheating Concerns

Bitcoin’s price temperature has surged to 2.67, raising concerns among market participants about potential overheating. This metric, which measures the relative price of Bitcoin compared to its historical average, has been closely watched by analysts as an indicator of market sentiment and potential price corrections.

The recent rise in Bitcoin’s price temperature has been driven by a significant price increase over the past month, with the cryptocurrency surging by 17.94% from a low of $83,000 to a high of $111,000. While this price appreciation has been welcomed by many investors, some stakeholders are expressing caution about the possibility of an overheated market.

One analyst, Axel Adler, has noted that Bitcoin’s price temperature is approaching levels that have historically signaled an overheated market. Adler observed that the previous two peaks of this cycle saw the Bitcoin price temperature reach 2.75 and 3.57 points, respectively. On average, the market enters an overheated zone when the Bitcoin price temperature reaches 3.14 points. Currently, there are still 0.47 points before the market enters full overheated territory, suggesting that Bitcoin still has some room for further price appreciation before reaching overheated levels.

Other market indicators also suggest that Bitcoin has not yet reached an overheated state. For instance, Bitcoin’s Market Value to Realized Value (MVRV) ratio, which measures the difference between the market capitalization and the realized capitalization, is currently around 2.4. Historically, Bitcoin has reached overheated levels when the MVRV ratio surpasses 3.0, indicating that long-term holders are starting to sell. With the MVRV ratio remaining below 2.5 and 3.0, it suggests that Bitcoin still has more room for growth.

Additionally, the Net Unrealized Profit/Loss (NUPL) ratio, which measures the difference between the market capitalization and the realized capitalization, is currently at 58% or 0.58. This level is considered a belief/denial zone, indicating that Bitcoin is yet to be overheated since the NUPL has not hit 0.75. When the NUPL enters an extreme euphoria zone, it typically leads to profit-taking as holders start to worry about potential corrections.

Furthermore, the Pi cycle top indicator, which measures the 111-day Simple Moving Average (SMA) and the 2x 350-day SMA, suggests that Bitcoin is far from overheated. The last crossover of these two lines was recorded in 2021, and at the time of writing, the 350 x2 SMA was around $160,000, while the 111 DSMA was at $91,000. This indicates that there is still more room for growth until the two lines meet.

In summary, while Bitcoin’s price temperature has spiked to near overheated levels, other market indicators suggest that the cryptocurrency still has room for further price appreciation. A continuation of the current uptrend could see Bitcoin hit $120,000. However, if a correction emerges as some holders turn to profit realization, Bitcoin could retrace to $106,000. Investors should closely monitor these indicators and be prepared for potential market volatility.