Bitcoin demand is still weak, but stablecoin liquidity is increasing – CryptoQuant

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

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

Bitcoin demand metrics are still weak

Bitcoin’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 since January 2021, and as demand slowed, prices fell to $50,000.

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

Additionally, Bitcoin exchange-traded funds (ETFs) in the United States have recorded average daily purchases of 1,300 BTC in recent weeks, significantly down from the 12,500 BTC recorded in March. Higher spot ETF purchases often increase global demand for bitcoin, in turn triggering price rallies.

Stablecoin liquidity is growing

CryptoQuant said sluggish demand for spot Bitcoin ETFs is also evident in the lower BTC price premium on Coinbase. This metric rose as high as 0.25% earlier this year when bitcoin saw strong demand and larger ETF purchases, but has since declined and currently stands at 0.01% . This shows that demand for bitcoins in the US has weakened.

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

Permanent bitcoin holders are also hoarding BTC at unprecedented levels, causing their balances to grow at a record monthly rate. An increase in the liquidity of stablecoins and demand from permanent holders correlates with higher bitcoin prices, suggesting that there is a good chance that the market will witness a rally in the coming weeks.

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

2024 LIMITED OFFER on BYDFi Exchange – Up to $2888 Welcome Reward, Use this link to register and open a 100 USDT-M position for free!