Bitcoin’s Healthy Ascendancy: On-Chain Analysis Validates a Sustainable Bull Market

Main Points：

• On-chain metrics from CryptoQuant’s Avocado_onchain show Bitcoin’s current rally lacks overheating signals, a hallmark of a sound bull market.
• Funding rates and market buy order volumes on Binance remain subdued, contrasting with past cycles and indicating measured investor behavior.
• Swissblock’s Bitcoin Fundamental Index (BFI) analysis dismisses the risk of a bearish double top or bearish divergence in on-chain fundamentals.
• Institutional actors continue to accumulate: MicroStrategy added 7,390 BTC, bringing holdings above 576,000 BTC.
• Spot Bitcoin ETFs saw robust inflows in mid-May, including $667.4 million on May 19 and $329.2 million on May 20.
• Macroeconomic tailwinds—prospects for U.S. rate cuts and safe-haven demand amid Treasury yield volatility—have lifted Bitcoin past $104,000.
• Ethereum Layer 2 networks show rising on-chain activity, illustrating practical blockchain utility beyond speculation.
• Analysts project Bitcoin could reach $115,000–$125,000 by mid-summer if current on-chain resilience persists.

1. Sustainable Bullish Signals from On-Chain Analysis

CryptoQuant’s registered analyst Avocado_onchain observed on May 19 that Bitcoin’s upward trajectory is unfolding without traditional “overheating” markers—namely, spiking funding rates or explosive market‐buy order volumes. In prior cycles, notably when BTC set new all-time highs in March 2024 and January 2025, each rally was accompanied by a surge in Binance market‐buy orders and a rapid climb in perpetual futures funding rates. Those precedented spikes ultimately triggered swift corrective phases, weakening investor sentiment and prompting many to exit the market.

By contrast, the current rebound—following the most recent pullback—exhibits stable funding rates and a declining trend in Binance market buys, suggesting that buyers are pacing themselves rather than chasing prices. While some might read this conservatism as signs of underlying weakness, Avocado_onchain interprets it as evidence of a more robust and sustainable bull run, free from the froth that precipitates steep corrections.

2. Funding Rates and Market Buy Orders: A Different Pattern

In past BTC all-time-high breakouts, funding rates on perpetual futures soared above historical norms, and retail and leveraged traders piled in via market orders. Those imbalances between leverage and spot liquidity strained exchanges and exacerbated volatility. Today, funding rates hover near multi-month averages, and market buy volumes on Binance are actually on a modest downward slope—even as the spot price recovers toward its prior peak. This divergence suggests a healthier demand profile:

1. Measured Positioning: Traders are entering positions incrementally, reducing the risk of forced liquidations that exacerbate sell-offs.
2. Institutional Anchoring: With large players like MicroStrategy executing block purchases off-exchange, the spot market sees less headline‐driven order flow.
3. Longer-Term Horizon: Investors appear willing to hold through short-term volatility rather than speculatively chase every move—aligning incentives toward accumulation rather than quick flips.

Such disciplined behavior bodes well for Bitcoin’s resilience, as it reduces the likelihood of violent drawdowns driven by margin‐calls and stop‐loss cascades.

3. Swissblock’s BFI and the Dismissal of Double-Top Concerns

On May 20, private wealth manager Swissblock published an analysis using its Bitcoin Fundamental Index (BFI) that further supports a stable bull market thesis. A true bearish double top—where price re-tests a prior high but momentum indicators diverge—would manifest as a decline in fundamental strength. Instead, during the February–March correction, the BFI remained squarely in neutral territory, never slipping into bearish zones. Swissblock emphasized that no “bearish divergence” signals have emerged, reinforcing the view that on-chain fundamentals remain intact even as price action oscillates.

Analysts at Swissblock contend that absence of divergence between price highs and fundamental metrics is rare in the lead-up to major corrections. The fact that BFI held steady suggests Bitcoin’s rally is underpinned by genuine demand rather than speculative euphoria. This complements CryptoQuant’s findings and paints a consistent picture of a bull market grounded in sustainable behavior rather than overheated speculation.

4. Institutional Appetite and ETF Inflows

Institutional participation has been a key driver of the current bull market, manifesting both in direct corporate purchases and via regulated investment vehicles:

• MicroStrategy’s Accumulation: Between May 12 and 18, MicroStrategy acquired 7,390 BTC at an average price of about $103,500, raising its total holdings to 576,230 BTC—valued around $61 billion—reinforcing its role as the largest corporate Bitcoin holder.
• Spot Bitcoin ETFs: Data from Farside Investors shows net inflows of $667.4 million on May 19—the second‐largest single‐day total this month—and $329.2 million on May 20, with IBIT and FBTC leading the charge. This influx underscores continued institutional demand for regulated, transparent exposure to spot BTC.
• Rebalancing by Hedge Funds: U.S. filings for Q1 2025 revealed that some hedge funds trimmed positions in certain spot ETFs amid price volatility, while advisory and endowment funds modestly increased stakes, signaling a dynamic but growing level of institutional engagement.

These trends demonstrate that institutional investors remain active participants, drawn by Bitcoin’s evolving regulatory clarity and its emergence as a portfolio diversifier or alternative asset.

5. Macro Drivers: Rate Cuts, Treasury Yields, and Safe-Haven Status

Bitcoin’s price surge past $104,000 on May 16 was fueled in part by renewed speculation of U.S. interest rate cuts and elevated institutional buying. Markets responded favorably to commentary from the Federal Reserve signaling a potential easing cycle, which tends to weaken the dollar and boost risk assets, including crypto.

Concurrently, U.S. Treasury yields have exhibited higher volatility, prompting investors to consider non-sovereign stores of value. Bitcoin’s emergence as a “digital gold” has been reinforced by events like the recent downgrade of U.S. debt, which led some allocators to seek alternative hedges against inflation and political risk. This confluence of macro factors enhances Bitcoin’s appeal as both an inflation hedge and a safe-haven in times of fiscal uncertainty.

6. Beyond Bitcoin: Layer 2 Growth and Practical Blockchain Use Cases

While Bitcoin captures headlines, the broader blockchain ecosystem is demonstrating tangible utility:

• Ethereum Layer 2 Adoption: On-chain data from Glassnode indicates a 5 percent increase in active Ethereum addresses over a 48-hour span as of May 20, reflecting surging usage of Layer 2 scaling solutions like Optimism, Arbitrum, and zkSync. These networks lower transaction costs and improve throughput, fostering DeFi applications, NFT marketplaces, and enterprise smart-contract deployments.
• Enterprise Integrations: Companies across finance, supply chain, and gaming are piloting Layer 2 chains for real-time settlement, provenance tracking, and tokenized incentives, underscoring blockchain’s utility beyond speculative trading.
• Developer Ecosystem: Tooling around modular and hybrid Layer 2 systems—combining data availability layers (e.g., Celestia) with rollup execution layers—has matured, offering businesses flexible, reliable platforms for issuing assets, managing identity, and automating compliance workflows.

This maturation signals a shift from purely financial use cases to practical deployments, which will underpin the next wave of blockchain adoption and create sustainable revenue streams across industries.

7. Future Outlook: Price Projections and Market Maturation

Given the convergence of disciplined on-chain behavior, growing institutional allocations, and favorable macro conditions, several analysts are optimistic about Bitcoin’s mid-summer trajectory. TechStory projects that, barring an unforeseen macro shock, Bitcoin’s “direction of least resistance” is upward, with targets of $115,000 to $125,000 by mid-summer. Historically, once Bitcoin breaches within 10 percent of all-time highs, price discovery often accelerates—driven by renewed FOMO and fresh capital inflows.

Moreover, as blockchain technology penetrates traditional sectors via Layer 2 and enterprise solutions, a reinforcing feedback loop may emerge:

1. Network Effects: Increased on-chain activity bolsters security and liquidity.
2. Infrastructure Build-out: Robust APIs and compliance tooling attract institutional and developer interest.
3. Financial Product Innovation: New tokenized assets and derivatives expand market depth.

This virtuous cycle could lay the groundwork for a more mature, less volatile crypto landscape over the coming years, shifting focus from pure speculation to practical applications and real-world integration.

Conclusion

Bitcoin’s current ascent stands out not for its frenzied pace, but for its measured strength. On-chain analyses from CryptoQuant and Swissblock confirm that fundamental metrics remain robust, devoid of the overheating that marked prior peaks. Institutional entities—from corporate treasuries like MicroStrategy to large cedar hedge funds and spot ETF investors—are steadily accumulating, buoyed by macroeconomic signals favoring alternative assets. Concurrently, the broader blockchain ecosystem is advancing, with Layer 2 platforms delivering cost-effective, scalable solutions that validate blockchain’s practical utility.

Together, these factors paint a portrait of a healthy bull market—one poised not only for further price milestones, but for enduring growth built on genuine demand and technological innovation. As Bitcoin and its supporting infrastructure continue to evolve, market participants can look beyond mere price appreciation toward a future where blockchain underpins new business models, financial products, and value-delivery mechanisms across the global economy.