According to a recent report by CryptoQuant dated August 20, the demand for Bitcoin has been on a downward trajectory since April, with recent weeks nearing negative levels. This decline in demand has seen Bitcoin’s growth drop from an increase of 496,000 BTC in April to a decrease of 25,000 BTC recently. The analysis measures apparent demand by assessing the net difference between the daily Bitcoin block subsidy and the change in the amount of Bitcoin that has been stationary for a year or more.
As the demand for Bitcoin wanes, the impact on its price is palpable. From a high of around $70,000 in April, Bitcoin’s price fell to approximately $51,000 by early August. Despite this notable correction, Bitcoin still maintains a year-to-date return of 33%.
Factors Influencing the Slowdown
A significant factor contributing to the slowdown in Bitcoin demand is the decreased activity by spot exchange-traded funds (ETFs) in the United States. Data from March shows a buying spree of 12,000 BTC, which sharply declined to an average of just 1,300 BTC from August 11 to August 17. Additionally, the price premium for BTC trading on Coinbase has dwindled from 0.25% in early 2024, following the launch of these ETFs, to a mere 0.01% presently, further indicating a reduction in demand within the U.S. market.
Experts suggest that a resurgence in purchases by spot ETFs could be crucial for reviving overall Bitcoin demand and potentially triggering a price rally.
Despite the downturn seen on the institutional side, permanent Bitcoin holders have been capitalizing on the lower prices. The total balance of addresses that have held Bitcoin without selling or spending is currently increasing at a record pace, with a monthly growth rate of 391,000 BTC. This rate of accumulation surpasses even that of the first quarter of 2024 when Bitcoin prices soared above $70,000.
Changing Dynamics Among Bitcoin Whales
The behavior of Bitcoin whales — addresses holding between 1,000 and 10,000 coins — has also shifted. While February saw a 6% increase in whale holdings, the fastest since February 2019, this has now moderated to just a 1% increase. Historically, a monthly growth rate exceeding 3% in whale holdings has been associated with rising Bitcoin prices, indicating that current whale activity may not be sufficient to drive a significant price increase.
As the landscape of Bitcoin investment changes, stakeholders are keenly observing these trends to forecast future movements. The ongoing adjustments in the strategies of both retail and institutional investors are likely to influence Bitcoin’s market dynamics in the coming months.
The fluctuations in demand and the corresponding price movements are not only influenced by investor behavior but also by broader market and regulatory developments. As such, any changes in the regulatory framework or significant market events could further impact Bitcoin’s demand and pricing.
The detailed analysis by CryptoQuant highlights a period of adjustment within the Bitcoin market, marked by reduced institutional interest and robust activity among long-term holders. The interplay of decreased demand from ETFs and increased acquisition by permanent holders underscores the complex dynamics influencing Bitcoin’s price and market stability.
