Key Points
- Bitcoin’s demand has fallen to its lowest level this year, with weak growth and negative trends in recent weeks.
- Despite the decrease in demand, the reducing Bitcoin supply on exchanges makes significant price drops unlikely.
Bitcoin’s demand has recently hit its lowest point, as prices have been consolidating. However, the decreasing supply of Bitcoin on exchanges is preventing significant price drops.
Since the 5th of August, Bitcoin has been trading within a range of $56K-$62K. The price has remained within this range since the 8th of August, hinting at possible consolidation or market uncertainty.
Factors Affecting Bitcoin Demand
One factor preventing major price breakouts is the weak growth in Bitcoin demand, which has even turned negative in recent weeks. Bitcoin’s demand peaked in April 2024, coinciding with the Bitcoin halving event, but it has since fallen to the lowest level this year.
The analysis highlighted the decreasing inflows into spot Bitcoin ETFs. In March, when BTC surged to all-time highs, the average daily purchases into Bitcoin ETFs were at 12,500 BTC. This figure fell to 1,300 BTC last week.
Whales, or large-scale Bitcoin holders, also seem to be reducing their Bitcoin holdings. The 30-day average whale holdings have fallen from 6% in February to 1%. This is the fastest drop since February 2021.
Despite the decrease in whale activity, long-term Bitcoin holders have been increasing their positions. These holders have been adding to their BTC holdings at a rate of around 391,000 BTC per month.
Bitcoin’s Future
With the slowing demand for Bitcoin, questions arise about whether it will break out of the $56K-$62K range. A detailed look into on-chain data paints a grim picture. Over 3 million addresses bought Bitcoin at this price range, and new investors who bought at these prices have not made significant profits.
Technical indicators also do not support a breakout. The Relative Strength Index (RSI) has remained rangebound with no significant surges in buying momentum. The Awesome Oscillator showed an uptrend, but the short histogram bars indicated a possibly weakening uptrend.
However, a steep downtrend below the current range is unlikely in the short term, due to the decreasing supply of Bitcoin on exchanges. The Exchange Supply Ratio has been on a steep decline over the past year. Therefore, despite demand being significantly low, exchange supply is also low, reducing the risk of steep corrections.
