The historical data on Bitcoin demand has shown that high demand often precedes price recoveries and rallies. However, the current market dynamics paint a different picture. Recent reports have indicated that Bitcoin demand growth has stagnated, remaining at low levels since early April when the cryptocurrency was trading around $70,000.
One of the key indicators of weakening Bitcoin demand is the significant decrease in its 30-day Apparent Demand growth. In early April, this figure stood at 496,000 BTC, but it has since dwindled to just 25,000 BTC. This drastic drop in demand has coincided with a decline in Bitcoin prices from its peak towards $50,000. The slowdown in demand growth has raised concerns about the potential for price recoveries in the near term.
The total holdings of large Bitcoin holders, commonly referred to as whales, have also seen a decline in growth rates. In February, the 30-day change in whale holdings peaked at 6%, the fastest pace since 2019. However, this figure has now plummeted to just 1%. According to CryptoQuant, Bitcoin whale holdings need to exhibit a monthly growth rate of over 3% for price rallies to occur.
Spot Bitcoin exchange-traded funds (ETFs) in the U.S. have experienced a similar decline in demand. Daily purchases have dropped significantly from 12,500 BTC in March to just 1,300 BTC in recent weeks. Higher spot ETF purchases typically drive overall Bitcoin demand upward and can trigger price rallies. The sluggish demand in spot Bitcoin ETFs is also reflected in the decreasing BTC price premium on Coinbase, which now stands at a mere 0.01%.
Despite the diminishing demand trends, there are some positive signs in the market. Stablecoin liquidity has been on the rise, reaching a new all-time high of $165 billion. This surge in stablecoin market capitalization indicates a growing interest in cryptocurrencies. Moreover, permanent Bitcoin holders have been accumulating BTC at unprecedented levels, leading to a record-high monthly growth rate in their balances. The increase in stablecoin liquidity and demand from long-term holders could potentially support higher Bitcoin prices in the near future.
The current state of Bitcoin demand presents a mixed picture. While key indicators like Apparent Demand growth and whale holdings have shown a significant decline, the rise in stablecoin liquidity and accumulation by permanent holders offer some hope for a potential market rally. It remains to be seen how these contrasting trends will ultimately impact Bitcoin prices in the coming weeks.
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