Bitcoin market signals are unclear: over 90% of the supply is in profit, but on-chain valuation and scarcity indicators are sending warnings.

Despite 92% of Bitcoin supply currently being in profit, reflecting the overall strength of the market, several key on-chain indicators are issuing warning signals. Bitcoin's "Network Value to Metcalfe Ratio" (NVM) and "Stock-to-Flow Ratio" (S2F) have both seen significant declines, coupled with net inflows of funds to spot exchanges, making the market outlook complex and uncertain.

Bullish Signal: Over 90% of Supply is Profitable

According to the latest data, the proportion of Bitcoin supply in profit has risen to 92%. Historically, this level usually signals the arrival of a bull market phase, indicating that the market is broadly based and most holders are in profit. The strong performance of this indicator provides a robust sense of optimism for the market, suggesting that prices may rise further. However, history also shows that when market sentiment reaches a peak, it may trigger corrections due to profit-taking.

Bearish Signals: Valuation, Scarcity, and Liquidity Risks

Despite the optimistic market sentiment, several key on-chain indicators have turned red, suggesting that the current rise may have "cracks."

(Source: CryptoQuant)

• NVM Ratio Decline: The "Network Value to Metcalfe Ratio" (NVM) has decreased by 4.54%. This ratio measures valuation by comparing market capitalization to network activity. The decline in the ratio indicates that the market capitalization growth of Bitcoin may have outpaced the growth of its network fundamentals, such as user activity. Historically, a decline in the NVM ratio often signals a slowdown in market growth or weak price expansion.
• Stock-to-Flow (S2F) Weakness: The "Stock-to-Flow" (S2F) model has dropped significantly by 42.86%. This model measures scarcity by comparing the circulating supply and new issuance, and has long been viewed as a key indicator of price growth cycles. The sharp decline in this ratio undermines the long-standing supply-driven price narrative and also reflects a weakening of market confidence in this scarcity valuation model.
• Exchange net inflow: As of the time of writing, the net inflow of funds to Bitcoin spot exchanges is $39.13 million. The ongoing inflow of funds increases the available supply on exchanges, which is typically associated with a potential increase in selling pressure. This reflects the uncertainty in the market in the short term, where liquidity has neither completely dried up nor formed a clear accumulation trend.

Market Outlook: Mixed Sentiment, Unclear Direction

In summary, the current Bitcoin market is facing multiple contradictory signals. On one hand, the 92% profit supply reflects a strong bullish momentum in the market; on the other hand, the decline of NVM and S2F, along with the inflow of spot funds, reveals potential issues in the valuation and scarcity models.

These conflicting signals collectively indicate that the Bitcoin market currently lacks a clear direction, with an uncertain outlook. Until these on-chain signals are resolved, the market conditions remain fragile, and traders should exercise caution.

Conclusion

The current Bitcoin market is a tug-of-war between strong price momentum and weak fundamental indicators. Although market sentiment is generally optimistic, the warnings from valuation and scarcity models cannot be ignored. Until these conflicting on-chain signals become clearer, the future direction of the market remains highly uncertain.