The historical on-chain data regarding Bitcoin demand has shown a correlation with price recoveries and rallies in the past. However, the current market situation paints a different picture. Recent findings from CryptoQuant reveal that Bitcoin demand has significantly slowed down since early April. This decrease in demand is reflected in the daily growth rate of Bitcoin and the stagnant increase in holdings by large investors. The 30-day Apparent Demand growth for Bitcoin has plummeted from 496,000 BTC to 25,000 BTC, indicating a sharp decline in interest.
The decline in Bitcoin demand has had a direct impact on the price of the cryptocurrency. The surge in demand witnessed in April, which coincided with the highest increase in holdings by large investors since January 2021, resulted in a price drop to $50,000 as soon as the demand tapered off. The growth rate in total holdings by whales has also fallen to concerning lows. For instance, the 30-day change in whale holdings dropped from 6% in February to a mere 1% recently. According to CryptoQuant, Bitcoin prices are unlikely to rally unless there is a monthly growth rate of more than 3% in whale holdings.
The average daily purchases of spot Bitcoin exchange-traded funds (ETFs) in the U.S. have seen a significant decline from 12,500 BTC in March to 1,300 BTC in recent weeks. This drop in ETF purchases is a key factor contributing to the overall sluggish demand for Bitcoin. The lower BTC price premium on Coinbase further emphasizes the weakening demand for Bitcoin in the U.S. A metric that rose to 0.25% earlier in the year due to strong demand and ETF purchases has dwindled to a mere 0.01%, indicating a lack of interest in the market.
Positive Signs Amidst the Decline
While the current scenario may seem bleak, there are some positive developments worth noting. Stablecoin liquidity has been on the rise, with the total market capitalization of stablecoins reaching a new all-time high of $165 billion. Furthermore, permanent Bitcoin holders are accumulating the cryptocurrency at unprecedented levels, leading to a record-breaking monthly growth in their balances. These trends in stablecoin liquidity and demand from permanent holders could potentially lead to higher Bitcoin prices in the future, hinting at a possible rally in the market in the coming weeks.
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