Historical on-chain data has shown that high bitcoin demand typically precedes price increases and rallies. However, the current market dynamics paint a different picture. Recent reports indicate that bitcoin demand has actually slowed down significantly since early April, despite the cryptocurrency hovering around $70,000 at that time. The daily growth of bitcoin has slowed, and there has been a decline in the increase of large investor holdings. For example, Bitcoin’s 30-day Apparent Demand growth has dropped from 496,000 BTC in early April to 25,000 BTC recently. This decline in demand has been reflected in the drop in prices to around $50,000.
Whale Holdings and ETF Purchases
The growth in total holdings of large Bitcoin holders, such as whales with 1,000-10,000 BTC, has also decreased to very low levels. In February, the 30-day change in whale holdings was at 6%, but it has now fallen to 1%. According to CryptoQuant, bitcoin whale holdings need a monthly growth rate of over 3% for prices to rally. Moreover, spot Bitcoin exchange-traded funds (ETFs) in the U.S. have seen a significant decline in average daily purchases from 12,500 BTC in March to 1,300 BTC recently. Higher spot ETF purchases typically drive bitcoin demand up and trigger price rallies, but the decrease in purchases indicates a lack of demand at the moment.
Stablecoin Liquidity and Permanent Holders
While the current state of bitcoin demand may seem bleak, there are some positive indicators. For instance, stablecoin liquidity has been on the rise, with the total market capitalization of stablecoins hitting a new all-time high at $165 billion. Additionally, permanent bitcoin holders are accumulating BTC at unprecedented levels, causing their balances to grow at a record-high monthly rate. The increase in stablecoin liquidity and demand from permanent holders usually correlates with higher bitcoin prices, hinting at a potential rally in the near future.
The data on bitcoin demand and price movements suggest that a price recovery or rally may not be imminent due to the low levels of demand growth and whale holdings. However, the increasing stablecoin liquidity and accumulation by permanent holders offer some hope for a potential market upturn in the coming weeks. Investors and traders should remain vigilant and keep an eye on these key metrics to gauge the future direction of bitcoin prices.