The historical data on Bitcoin’s on-chain activity has shown a strong correlation between high demand and price recoveries in the past. However, the current market dynamics paint a different picture. According to a recent report from CryptoQuant, Bitcoin’s demand growth has significantly slowed since early April, when the price was hovering around $70,000.
The 30-day Apparent Demand growth of Bitcoin has dropped from 496,000 BTC in early April to 25,000 BTC recently. This decline in demand was also reflected in the decreasing pace of large investor holdings. The total holdings of large Bitcoin holders, such as whales with 1,000-10,000 BTC, have fallen to very low levels. In fact, the 30-day change in whale holdings has plummeted from 6% in February to just 1% recently.
Impact on Price Movements
The slowdown in demand growth has had a direct impact on Bitcoin’s price movements. As demand decreased, prices declined towards $50,000. In order for prices to rally, CryptoQuant suggests that Bitcoin whale holdings need a monthly growth rate of more than 3%. However, the current data is far from meeting this threshold.
Spot Bitcoin exchange-traded funds (ETFs) in the U.S. have also seen a significant decrease in average daily purchases, dropping from 12,500 BTC in March to 1,300 BTC in recent weeks. Higher spot ETF purchases usually drive overall Bitcoin demand upward and trigger price rallies. The slow demand in spot Bitcoin ETFs is evident in the lower BTC price premium on platforms like Coinbase, which has declined from 0.25% to 0.01%.
Positive Signs for the Future
Despite the current decrease in demand and price movements, there are some positive signs on the horizon. Stablecoin liquidity has been on the rise, with the total market capitalization of stablecoins hitting a new all-time high of $165 billion. Permanent Bitcoin holders are also accumulating BTC at record-high monthly rates, indicating a strong belief in the long-term value of the cryptocurrency.
The increase in stablecoin liquidity and demand from permanent holders could potentially lead to higher Bitcoin prices in the future. While the current market conditions may not be conducive to immediate price rallies, the growing stability in certain aspects of the market suggests that there is still hope for a positive uptrend in the coming weeks.
While the current state of Bitcoin demand and price movements may not be ideal for short-term gains, the overall market trends and increasing stability in certain areas indicate that there is potential for a rally in the near future. Investors should keep a close watch on the changing dynamics and be prepared to adapt their strategies accordingly.
