Bitcoin (BTC) Demand Metrics Still Weak, Suggesting Price Rallies Are Unlikely in the Near Term

Historical on-chain data shows that high bitcoin (BTC) demand often precedes price recoveries and rallies; however, this is not the case at the moment.

Historical on-chain data shows that high bitcoin (BTC) demand often precedes price recoveries and rallies; however, this is not the case at the moment. Current market dynamics suggest that such price movements are unlikely in the near term because BTC demand growth has remained at low levels.

A recent report from CryptoQuant revealed that bitcoin demand has slowed significantly since early April, when the crypto asset hovered around $70,000. This is seen in the slow daily growth of bitcoin and the declining increase of large investor holdings.

Bitcoin Demand Metrics Still WeakBitcoin's 30-day Apparent Demand growth has fallen from 496,000 BTC in early April to 25,000 BTC recently. The increase seen in April was also the highest recorded since January 2021, and as demand slowed, prices declined toward $50,000.

The growth in total holdings of large Bitcoin holders like whales (addresses with 1,000-10,000 BTC) fell to very low levels. In February, the 30-day change in whale holdings stood at 6%, which was recorded as the fastest pace since February 2019, but the figure has plummeted to 1%. CryptoQuant said bitcoin whale holdings need a monthly growth rate of more than 3% for prices to rally.

Moreover, spot Bitcoin exchange-traded funds (ETFs) in the U.S. have seen average daily purchases of 1,300 BTC in recent weeks, which is significantly down from the 12,500 BTC recorded in March. Higher spot ETF purchases often drive overall bitcoin demand upward and, in turn, trigger price rallies.

Stablecoin Liquidity Is GrowingCryptoQuant said the slow demand in spot Bitcoin ETFs is also evident in the lower BTC price premium on Coinbase. This metric surged to 0.25% earlier this year when bitcoin witnessed strong demand and larger purchases from ETFs, but it has been on a decline since then and currently sits at 0.01%. This shows that bitcoin demand in the U.S. has been weakening.

On the brighter side, stablecoin liquidity is now increasing, which was not the case a few weeks ago. CryptoQuant said the total market capitalization of stablecoins has surged to a new all-time high at $165 billion.

Permanent bitcoin holders are also accumulating BTC at an unprecedented level, with their balances increasing at a record-high monthly rate. An increase in stablecoin liquidity and demand from permanent holders usually coincides with higher bitcoin prices, suggesting there is a good chance the market may witness a rally in the coming weeks.

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