Bitcoin Demand Remains Low, But Stablecoin Liquidity Increases: CryptoQuant

Historical on-chain data shows that strong demand for Bitcoin (BTC) often precedes rallies and price increases; however, this is not the case at present. Current market dynamics suggest that such price movements are unlikely in the near term as BTC demand growth 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 reflected in bitcoin’s slow daily growth and the decline in the increase in holdings by large investors.

Bitcoin Demand Indicators Remain Weak

Bitcoin’s 30-day apparent demand growth has dropped from 496,000 BTC in early April to 25,000 BTC recently. The increase seen in April is also the highest recorded since January 2021, and as demand slowed, prices have declined towards $50,000.

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

Additionally, U.S. spot Bitcoin exchange-traded funds (ETFs) have seen average daily purchases of 1,300 BTC in recent weeks, significantly lower than the 12,500 BTC recorded in March. Higher spot ETF purchases often lead to higher overall demand for Bitcoin and, as a result, higher prices.

Stablecoin liquidity increases

According to CryptoQuant, the weak demand for spot Bitcoin ETFs is also evident in the lower BTC price premium on Coinbase. This metric jumped to 0.25% earlier this year when bitcoin saw strong demand and larger purchases from ETFs, but it has been declining since then and currently sits at 0.01%. This shows that demand for bitcoin in the United States is weakening.

The positive side is that stablecoin liquidity is now increasing. This was not the case a few weeks ago. CryptoQuant said that the total stablecoin market cap has reached a new all-time high of $165 billion.

Bitcoin permanent holders are also accumulating BTC at unprecedented levels, leading to record monthly growth in their balances. An increase in stablecoin liquidity and permanent holder demand correlates with a rise in Bitcoin prices, suggesting that there is a strong chance that the market will see a recovery in the coming weeks.