Recent on-chain data analysis indicates a concerning trend in the world of Bitcoin. Despite historical patterns showing that high demand often precedes price rallies, the current market dynamics are not aligning with this trend. Bitcoin demand growth has stagnated, with a significant slowdown since early April when the cryptocurrency was priced at around $70,000. According to a recent report from CryptoQuant, Bitcoin’s 30-day Apparent Demand growth has plummeted from 496,000 BTC to 25,000 BTC over the past few weeks. This sharp decline in demand has coincided with a drop in prices towards the $50,000 mark.
A key indicator of market sentiment, the total holdings of large Bitcoin holders such as whales (addresses with 1,000-10,000 BTC) have also dwindled to very low levels. In February, the 30-day change in whale holdings saw a rapid surge of 6%, the fastest pace since February 2019. However, this figure has now dropped to a mere 1%, signaling a lack of confidence among big players in the market. CryptoQuant suggests that for prices to rally, Bitcoin whale holdings need to experience a monthly growth rate exceeding 3%, a target that seems far from achievable at the moment.
Spot Bitcoin exchange-traded funds (ETFs) in the U.S. have seen a substantial decline in average daily purchases, from 12,500 BTC in March to only 1,300 BTC recently. Higher spot ETF purchases typically drive overall Bitcoin demand and trigger price rallies. The decreased demand in spot Bitcoin ETFs is evidenced by the dwindling BTC price premium on Coinbase, dropping from 0.25% to 0.01%. These numbers reflect weakening Bitcoin demand in the U.S. market, further dampening hopes of a near-term price recovery.
Amidst the bleak outlook for Bitcoin demand, there are glimmers of hope in the form of stablecoin liquidity. Recent data shows a surge in 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, causing their balances to grow substantially each month. This increase in stablecoin liquidity and the demand from long-term holders are positive signs that could potentially lead to higher Bitcoin prices in the future.
The current state of Bitcoin demand and price movements paints a cautious picture for investors. The lackluster growth in demand, coupled with declining whale holdings and reduced spot ETF purchases, indicates a challenging road ahead for Bitcoin price recovery. However, the increase in stablecoin liquidity and the accumulation by permanent holders offer a ray of hope for a potential market rally in the coming weeks. Investors should closely monitor these trends to make informed decisions in the volatile cryptocurrency market.