Bitcoin is trading near $118,000 after reaching a new all-time high of $123,000 in July. Despite this strong price level, key data points indicate that its momentum is cooling, which could lead to a pause before any further upward movement.

One such indicator is CryptoQuant’s Bull Score Index, which fell from 80 to 60 following the recent peak. The drop suggests the market has entered a bullish cooldown phase, where overall optimism remains but momentum has softened.

Signs of a Cooling Market

This slowdown aligns with seasonal trends, as summer months often bring lower trading volumes and reduced enthusiasm. According to a CryptoQuant report, traders appear to be taking profits after the rally, which has weakened immediate buying pressure.

The observation is supported by on-chain indicators like stablecoin liquidity. This metric, which tracks new capital flowing into crypto, has stalled and even shifted negative, indicating fewer fresh funds entering the market. While USDT liquidity increased by $9.6 billion over the past 60 days, its growth rate has slowed and now falls below average levels. This means capital inflows remain, but at a much slower pace than before.

Another sign of weakening momentum is the traders’ unrealized profit margin, a measure of gains held but not yet realized, which has also declined. Many holders have taken profits, lowering unrealized gains and signaling reduced momentum. Currently, this margin stands at about 7.4%, declining and below its typical trend. Together, these factors suggest a potential short-term consolidation or mild price corrections.

Valuation Metrics and Market Outlook

Valuation indicators show the market balanced near a critical point between bullish and bearish zones. The Bull-Bear Market Cycle Indicator remains slightly positive but is close to turning negative.

If bitcoin’s price weakens further, the indicator could drop below zero, pushing the Bull Score Index under 40. Such a move would mark the first formal bearish market since April 2023.

Given these signals, the analytics firm sees bitcoin entering a cautious phase characterized by slowing momentum instead of a definitive reversal. Market participants need to stay alert for new developments that could spark renewed buying interest and trigger the next price surge.