The historical on-chain data indicates that high bitcoin demand typically precedes price recoveries and rallies. However, the current market dynamics paint a different picture. Recent reports from CryptoQuant reveal that bitcoin demand has slowed significantly since early April, when the crypto asset was hovering around $70,000. The slow daily growth of bitcoin and the declining increase of large investor holdings are clear indicators of the stagnant demand growth in the market.
The growth in total holdings of large Bitcoin holders, such as whales with 1,000-10,000 BTC, has also fallen to very low levels. The 30-day change in whale holdings saw a significant drop from 6% in February to 1% recently. According to CryptoQuant, bitcoin whale holdings need a monthly growth rate of over 3% for prices to rally. This decline in whale holdings reflects the overall sluggish demand in the market, contributing to the lack of price movements.
Spot Bitcoin exchange-traded funds (ETFs) in the U.S. have seen a significant drop in average daily purchases, from 12,500 BTC in March to 1,300 BTC in recent weeks. Higher spot ETF purchases typically drive overall bitcoin demand upward and trigger price rallies. The slow demand in spot Bitcoin ETFs is also reflected in the lower BTC price premium on Coinbase, which has been on a decline and currently sits at 0.01%. This decline in demand from ETFs and the lack of price premium indicate weakening bitcoin demand in the U.S. market.
On a positive note, stablecoin liquidity is on the rise, with the total market capitalization of stablecoins reaching a new all-time high at $165 billion. This increase in stablecoin liquidity, along with the growing accumulation of BTC by permanent holders at record-high monthly rates, suggests a potential for higher bitcoin prices. The correlation between stablecoin liquidity, demand from permanent holders, and price movements indicates a possible market rally in the near future.
The current state of bitcoin demand and market dynamics suggest a lackluster performance in the near term. The slow growth in demand, declining whale holdings, and reduced activity in spot Bitcoin ETFs point towards a stagnant market. However, the increase in stablecoin liquidity and growing accumulation by permanent holders may hint at a potential price rally in the coming weeks. Investors and traders should closely monitor these trends and developments to make informed decisions in the volatile cryptocurrency market.