The historical data on Bitcoin demand and price recoveries typically show a strong correlation, with high demand often preceding price rallies. However, the current market dynamics paint a different picture. Recent reports from CryptoQuant indicate that Bitcoin demand growth has been sluggish since early April, despite the cryptocurrency hovering around $70,000 at that time. The 30-day Apparent Demand growth for Bitcoin has significantly decreased from 496,000 BTC to 25,000 BTC, leading to a decline in prices towards $50,000.
Decline in Whale Holdings
Another concerning trend is the decrease in total holdings of large Bitcoin holders, also known as whales. In February, the 30-day change in whale holdings was at 6%, marking the fastest pace since February 2019. However, this figure has plummeted to 1% recently. According to CryptoQuant, for prices to rally, Bitcoin whale holdings need a monthly growth rate of more than 3%. The slowdown in whale accumulation is a clear indicator of reduced demand in the market.
Spot Bitcoin exchange-traded funds (ETFs) in the U.S. have also experienced a drop in average daily purchases, falling from 12,500 BTC in March to 1,300 BTC recently. Higher ETF purchases usually drive overall Bitcoin demand and trigger price rallies. The decrease in spot Bitcoin ETF demand is further reflected in the declining BTC price premium on Coinbase, dropping from 0.25% to 0.01%. This indicates weakening Bitcoin demand in the U.S. market.
Despite the overall decrease in Bitcoin demand, there are some positive developments in the market. Stablecoin liquidity has been on the rise, with the total market capitalization of stablecoins reaching a new all-time high of $165 billion. Additionally, permanent Bitcoin holders are accumulating BTC at unprecedented levels, leading to a record-high monthly growth rate in their balances. The increase in stablecoin liquidity and demand from permanent holders could potentially signal a future rally in Bitcoin prices.
The current state of Bitcoin demand and price movement is characterized by a slowdown in demand growth, a decline in whale holdings, and a decrease in spot Bitcoin ETF purchases. However, the rise in stablecoin liquidity and accumulation by permanent holders offer a glimmer of hope for a potential market rally in the near future. Investors and traders should closely monitor these trends to make informed decisions in the volatile cryptocurrency market.
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