Looking at historical data, it is evident that high demand for bitcoin often precedes price recoveries and rallies. However, the current market dynamics paint a different picture. Bitcoin demand growth has significantly slowed down since early April, when the price of the cryptocurrency stood around $70,000. This slowdown can be observed in the daily growth rate of bitcoin, as well as the decrease in holdings by large investors.
The 30-day apparent demand growth for bitcoin dropped from 496,000 BTC in early April to 25,000 BTC recently. The decline in demand was accompanied by a reduction in the total holdings of large bitcoin holders, such as whales. In February, the 30-day change in whale holdings was at 6%, but it has now plummeted to 1%. According to CryptoQuant, bitcoin whale holdings need to grow by more than 3% monthly for prices to rally.
The average daily purchases of spot Bitcoin ETFs in the U.S. have decreased from 12,500 BTC in March to 1,300 BTC in recent weeks. Higher spot ETF purchases typically drive overall bitcoin demand up and can trigger price rallies. The slowing demand in these ETFs is reflected in the declining BTC price premium on platforms like Coinbase, which has dropped to 0.01% from 0.25% earlier this year.
Despite the decrease in overall bitcoin demand, there are some positive signs in the market. Stablecoin liquidity has been increasing, with the total market capitalization of stablecoins reaching a new all-time high of $165 billion. Permanent bitcoin holders are also accumulating the cryptocurrency at unprecedented levels, leading to a record-high monthly growth rate in their balances. The rise in stablecoin liquidity and demand from permanent holders could potentially result in higher bitcoin prices.
The current state of bitcoin demand suggests that price recoveries and rallies may not be on the immediate horizon. The decrease in demand growth, coupled with the decline in whale holdings and spot Bitcoin ETF activity, indicates a lack of bullish momentum in the market. However, the increase in stablecoin liquidity and accumulation by permanent holders offer some hope for a potential rally in the coming weeks. Investors should closely monitor these factors to gauge the future direction of bitcoin prices.
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