The historical data on Bitcoin’s on-chain activities reveals an interesting trend – high demand for Bitcoin typically precedes price recoveries and rallies. However, the current market dynamics suggest a different story. Recent reports from CryptoQuant indicate that Bitcoin demand has significantly slowed down since early April, when the cryptocurrency was priced around $70,000. The slow daily growth of Bitcoin and the diminishing increase in large investor holdings are clear indicators of this trend.
Bitcoin’s 30-day Apparent Demand growth has plummeted from 496,000 BTC in early April to 25,000 BTC recently. The spike in demand seen in April, the highest recorded since January 2021, coincided with a decline in prices towards $50,000 as demand slowed. Large Bitcoin holders, often referred to as whales (addresses with 1,000-10,000 BTC), have also seen a significant decrease in total holdings growth. In February, the 30-day change in whale holdings peaked at 6%, but it has now dropped to a mere 1%. According to CryptoQuant, the monthly growth rate of whale holdings needs to exceed 3% for prices to rally.
In the U.S., spot Bitcoin exchange-traded funds (ETFs) have experienced a drastic drop in average daily purchases – from 12,500 BTC in March to 1,300 BTC recently. Higher spot ETF purchases are known to boost overall Bitcoin demand and trigger price rallies. The decrease in demand for spot Bitcoin ETFs is also evident in the declining BTC price premium on Coinbase, which has dropped from 0.25% earlier this year to 0.01% currently.
On a positive note, stablecoin liquidity has been on the rise, reaching a new all-time high market capitalization of $165 billion. Permanent holders of Bitcoin are also accumulating the cryptocurrency at unprecedented levels, leading to a significant monthly increase in their balances. The surge in stablecoin liquidity and the demand from permanent holders often correlate with higher Bitcoin prices, hinting at the possibility of a rally in the near future.
The current state of Bitcoin demand and price movements paints a complex picture. While the slowing demand and decrease in whale holdings indicate a bearish trend, the increase in stablecoin liquidity and accumulation by permanent holders offer a glimmer of hope for a potential price rally in the coming weeks. Investors and traders should closely monitor these factors to make informed decisions in the volatile cryptocurrency market.
