‘Bear market rally’: CryptoQuant breaks down bitcoin’s recent price rebound

Following Bitcoin’s significant rebound from recent lows, pushing the price back toward crucial resistance levels, major on-chain analytics firm CryptoQuant has issued a cautionary report, labeling the current upswing as a ‘bear market rally.’ This assessment implies that the recent price action is a temporary correction of oversold conditions rather than a sustained reversal of the long-term bearish trend.

CryptoQuant’s analysis centers on several key on-chain indicators that suggest the rally lacks fundamental support from conviction buyers, particularly long-term holders (LTHs) and large institutions. Specifically, the firm highlights the behavior of exchange flows and derivatives markets.

**Lack of Institutional Accumulation:** While Bitcoin’s price momentum has been strong, the outflow of BTC from exchanges—a traditional signal of strong accumulation by institutions or high-net-worth individuals moving assets to cold storage—has been inconsistent. CryptoQuant notes that exchange reserves have remained relatively stable, failing to show the massive drawdown typically associated with the beginning of a genuine bull cycle.

**Derivatives Market Overheating:** A primary factor supporting the ‘bear market rally’ thesis is the high dependency on the derivatives market. Funding rates, which have turned strongly positive across major exchanges, indicate that speculative traders are highly leveraged and paying premiums to maintain long positions. High Open Interest combined with elevated funding rates suggests that the rally is vulnerable to sudden long squeezes, potentially leading to rapid price corrections if momentum falters.

**Short-Term Holder Profit Taking:** Data related to Spent Output Profit Ratio (SOPR) suggests that short-term holders (STHs) are taking profits quickly upon reaching certain price targets. This immediate selling pressure from newer market participants prevents the establishment of a strong base and signals a lack of confidence in the sustained upward trajectory. CryptoQuant suggests that until LTHs resume aggressive accumulation and the market structure shifts away from being primarily leverage-driven, investors should remain cautious, viewing the current rebound as volatile movement within a broader consolidation range.

Source: ‘Bear market rally’: CryptoQuant breaks down bitcoin’s recent price rebound