Bitcoin’s Profit Surge Amid Concerns Over On-Chain Activity Sustainability

Bitcoin traders are back in profit, but falling on-chain activity raises sustainability concerns.

• Bitcoin’s Stock-to-Flow Ratio dropped by 16.66%, reflecting reduced scarcity from increased miner or holder distribution.

• BTC’s short-term holder margin flipped from -19% in April to +21% in May.

Bitcoin [BTC] short-term holders have rebounded sharply, with their Profit/Loss Margin jumping from -19% in April to +21% in May. This turnaround signals renewed trader optimism after weeks of correction.

The Realized Price for the 1–3 month cohort has stabilized at $84,600, further supporting accumulation sentiment. At press time, BTC hovered at $103,447, up 0.03% in the last 24 hours.

Moreover, the 30-day Moving Average of the Profit/Loss Margin now sits at +9%—well below the overheated +40% threshold.

This indicates headroom for more gains without triggering aggressive profit-taking.

Source: CryptoQuant

Is BTC’s valuation outpacing its fundamentals?

Having said that, not all indicators aligned with the price recovery.

The Network Value to Transaction (NVT) Ratio climbed by nearly 70% to hit 52.81. This sharp rise implies Bitcoin’s market capitalization is growing faster than the actual transferred volume on-chain.

Although this can reflect bullish valuation expansion, it often precedes local tops when not supported by active network usage.

Therefore, the current spike raises early caution, especially if the growth remains detached from transaction throughput.

Source: CryptoQuant

In fact, network usage failed to keep up.

Bitcoin’s Stock-to-Flow Ratio dropped by 16.66% to 1.0595 million. This decline reflects reduced scarcity pressure, potentially due to shifting miner behavior or a slowdown in accumulation from long-term holders.

When stock-to-flow trends lower, newly mined BTC typically enters circulation faster, potentially creating mid-term supply pressure if demand doesn’t rise in tandem.

Is BTC’s network activity too weak to sustain the rally?

Despite Bitcoin rallying to over $103K, Daily Active Address (DAA) Divergence remains deeply negative at -241.32%.

This indicated a major disconnect between price action and user activity, as fewer unique addresses are interacting with the network relative to its rising valuation.

Historically, such steep negative divergence signals weakening on-chain fundamentals behind price moves.

Source: Santiment

On top of that, transaction count and network growth dropped sharply to 67.2K and 52.9K, respectively.

The cool-off in usage signals hesitation from both new and existing participants—an unusual backdrop for a sustained rally.

A healthy rally typically aligns with increased user adoption and transaction throughput. However, this recent decline contradicts price momentum and suggests the rally may lack strong fundamental support.

Source: Santiment

Long/Short Ratio signals rising indecision in the derivatives market

Looking at derivatives, the Long/Short Ratio fell to 0.9964.

Longs made up 49.91%, while shorts ticked up to 50.09%—nearly even.

This near-equal distribution reveals increasing uncertainty in trader expectations. The sharp shift from a previously long-heavy bias highlights growing caution after Bitcoin’s recent price surge.

Source: CoinGlass

The current market outlook presents a conflicting narrative.

On one hand, Bitcoin’s recovery in trader profit margins and sustained price strength suggests bullish momentum.

On the other hand, a sharp rise in valuation is not being matched by growth in transaction activity, user engagement, or network expansion.

This disconnect raises concerns about the sustainability of the rally. For the upward trend to continue in a healthy manner, fundamental on-chain metrics must improve.

Conclusion

The landscape now presents challenges for Bitcoin’s ongoing recovery, with various metrics indicating a potential disconnect between price and underlying network dynamics. Investors should be vigilant and assess how emerging data influences the market’s trajectory.