Bitcoin (BTC) might have entered a possible market cooldown phase, according to key on-chain metrics analyzed by CryptoQuant.

The analytics firm’s data shed light on the relationship between Bitcoin’s Realized Cap and Thermo Cap – two indicators related to overall network valuation.

The emergence of a “Dead Cross,” a bearish crossover where the Thermo Cap dips below the Realized Cap, has historically correlated with significant Bitcoin price corrections. This observation has put some traders on edge regarding near-term price action.

If this past trend repeats, Bitcoin may retreat toward the $75,000 support level, despite broader underlying bullish market sentiment often cited by analysts.

Understanding Bitcoin’s Realized Cap vs. Thermo Cap

The Realized Cap represents Bitcoin’s aggregate network valuation based on the price at which each coin last moved on the blockchain.

According to CryptoQuant analyst Bilal Huseynov, this metric provides a more accurate picture of the network’s true economic value by reflecting actual transaction prices and effectively filtering out likely lost or long-dormant Bitcoin holdings.

The Thermo Cap, conversely, depicts the total cumulative US dollar value of Bitcoin introduced into circulation via miner block rewards paid out over the network’s entire history. 

Analysts use the Thermo Cap alongside other valuation metrics like Market Cap and Realized Cap to help gauge potential market cycle tops or bottoms and evaluate net capital flows into or out of the Bitcoin network.

When the Thermo Cap value crosses below the Realized Cap value, this specific pattern has historically signaled the potential onset of a significant market correction phase for Bitcoin.

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This is reminiscent of a similar “Dead Cross” that occurred on this indicator before Bitcoin’s major 2022 bear market phase. That period saw prices eventually fall from near $45,000 down to around $16,000.

Bitcoin’s Bullish Case Despite Red Flags

Now, with this Thermo Cap/Realized Cap indicator flashing red again according to CryptoQuant’s charts, concerns about a potential temporary price reversal are rising among some on-chain analysts.

Huseynov, who credited fellow analyst Avocado_onchain for highlighting the pattern’s recent development, also suggested that based on this signal’s history, a price retest of the $75,000 level could potentially occur before Bitcoin resumes any further significant upward momentum.

Despite these specific on-chain warning signs, other analysts argue Bitcoin’s underlying strength, driven partly by ongoing institutional demand, remains generally intact.

As one example of continued accumulation, investment firm Metaplanet continued its aggressive Bitcoin strategy by buying another 160 BTC (worth over $13 million) recently. This brought its total reported corporate holdings to 4,206 BTC.

What Should Traders Watch Now?

Large institutional moves like Metaplanet’s continue to provide some underlying support and bullish market momentum signals.

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However, short-term traders should likely remain cautious as historical data suggests indicators like the Thermo Cap/Realized Cap cross often precede noticeable price pullbacks, even if the longer-term uptrend remains valid. If this “Dead Cross” signal is confirmed by further negative price action, traders will watch key support levels closely. 

Whether Bitcoin defies this historical on-chain pattern this time, or if a market cooldown period is indeed ahead, remains uncertain.