CryptoQuant analyst Darkfost announced that the bull-bear cycle indicator “has transitioned into the initial bullish phase,” while cautioning that it “isn’t an infallible signal.”
- Bitcoin’s value increased by more than 23% over the past week, marking its largest weekly gain since 2023, while the S&P 500 declined by 1.43% and the MSCI World Index fell by 1.19%.
- Open interest dropped by 42,907 BTC in the last week to reach 319,896 BTC, compared to a weekly average of 335,409 BTC.
- The portion of short-term holders making a profit surged from 26.1% to over 74%, and the corresponding exchange-flow indicator shifted from a negative to positive +28.6K BTC.
Last week’s Bitcoin (BTC) surge captured significant attention, as the cryptocurrency approached the $78,000 mark on Monday after achieving a remarkable weekly gain of over 23%, its highest increase since 2023. Meanwhile, the S&P 500 (SPX) decreased by 1.43%, and the MSCI World Index faced a decline. Nevertheless, amid this bullish trend, one trading indicator shows a downward movement, with open interest declining, raising questions within the industry about whether Bitcoin’s recent rally signifies the beginning of a prolonged surge or merely a realignment in positions.
André Dragosch, Bitwise’s European Head of Research, noted on X that Bitcoin’s 23% weekly increase coincided with the S&P 500’s 1.43% drop and the MSCI World Index’s 1.19% decline. Ethereum (ETH) outperformed with a 31.48% rise, and gold also saw a 5.18% increase. “It’s quite rare to witness such a significant performance disparity,” indicated Dragosch. “The separation is clear.”
BTC Moves Away from U.S. Stocks
Bitcoin (BTC) and the S&P 500 (SPX) continue to display high volatility. In the past six months, the correlation between these two assets has shifted between positive and negative, indicating that Bitcoin sometimes tracks closely with SPX and other times diverges. Although Bitcoin’s recent price increase is notable, the correlation appears to have shifted from a strong positive relationship to a mid-range level, generally a favorable sign for riskier assets.
Demand for BTC Uncertain
As of Sunday, Bitcoin open interest stood at 319,896 BTC, down from a weekly average of 335,409 BTC, based on data from CryptoQuant analyst Axel Adler Jr.’s dashboard. Open interest refers to the total number of derivative positions that remain open. The drop in open interest alongside a 23% price increase implies that the recent rally was not fueled by fresh leveraged positions.
Adler’s analysis notes that a significant negative change over seven days suggests a contraction of leverage, often serving as an effective reset signal. Currently, the open interest remains above the historical median of 275,257 BTC.
Bitcoin’s rise toward $78,000 is also revealing signs of detachment from market activity. Data from CryptoCon indicates active Bitcoin addresses hover around 543,000, with no sustained increase alongside the price rally. Additionally, Bitcoin’s open interest remains below previous highs. This separation indicates the surge may not be driven by widespread adoption or increased network activity, hinting instead at spot purchases and short position coverages as the primary catalysts behind this movement.
Short-Term Holders Turn Profitable
In a separate update, analyst Adler shared that Bitcoin’s upward price movement over the past week raised the share of short-term holders (STH) in profit from 26.1% to over 74%. Just a week earlier, nearly three-quarters of that supply was in the red.
During the same period, the net profit/loss for this cohort regarding exchanges shifted from negative 18.7K BTC on August 16 to a positive 28.6K BTC by Monday, surpassing Adler’s +25K threshold. Adler remarked that the return to profitability “also led to an increase in the volume of coins transferred to exchanges,” which he described as “heightening potential selling pressure.”
Adler indicated that a favorable scenario would require exchange flows to decrease toward zero while the profit share remains above 50%. A key risk arises if flows stay above +25K BTC while the profit share approaches 90% and price momentum starts to fade.
Bitcoin’s value saw an increase of over 1% in the previous 24 hours. On Stocktwits, retail sentiment around BTC remains in the ‘extremely bullish’ category, with discussion levels staying notably high over the last day.
Is a Bull Market on the Horizon?
Conversely, one analyst has a different perspective on Bitcoin’s price trends. Darkfost from CryptoQuant mentioned that the bull-bear market cycle indicator “has recently shifted to the early bull phase. Although it’s not an infallible indicator, it reinforces the notion that market conditions have notably improved,” he stated, noting that this development should be monitored in the upcoming weeks.
Why It Matters
Growing prices coupled with increasing open interest indicate that new leveraged positions are fueling the movement, as Adler’s dashboard suggests an ongoing participation in the trend. Conversely, prices rising alongside decreasing open interest point more towards spot buying or short positions being closed. Following a sharp movement, falling open interest “often serves as a reset signal, rather than indicating a new trend,” Adler notes.
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