Bitcoin’s price has been under significant downward pressure over the past few weeks, and this cryptocurrency researcher explained the role of demand in the market correction.
Apparent Decline in Demand for BTC – Cause for Concern?
In a recent post on the X platform, CryptoQuant Research Director Julio Moreno explained how the recent Bitcoin price correction is related to falling demand for Bitcoin. This analysis is based on the apparent demand for Bitcoin on the CryptoQuant platform.
Apparent demand calculations are often used in financial markets to assess demand by comparing production levels and changes in inventories. Essentially, this metric gives a clear picture of whether demand is increasing or decreasing.
In the case of cryptocurrencies such as Bitcoin, apparent demand is calculated using the concept of dormant supply. This concept tracks the amount of Bitcoin that has not been moved or transferred within a specific period.
As Moreno pointed out, the chart below uses 1-year inactive supply as a “stock proxy.” This means that it monitors the amount of BTC that has not been transferred or finalized for over a year.
Chart showing BTC apparent demand and price | Source: jjcmoreno/X
According to data from CryptoQuant, around 23,000 BTC have flowed out of the 1-year inactive supply over the past 30 days. This suggests a drop in demand for Bitcoin as long-term investors appear to be deciding to sell and move their Bitcoin.
This drop in demand has several implications, particularly on the value of the leading cryptocurrency. For example, CryptoQuant’s head of research noted that low demand is one of the catalysts for the recent price correction.
The inflow of significant amounts of BTC from long-term holders into the market increases the available supply, thus putting downward pressure on prices. Additionally, price declines can occur when the market’s buying pressure is insufficient to absorb the additional supply.
CryptoQuant revealed in its weekly report that demand for Bitcoin dropped significantly compared to Q1 – following the launch of US spot ETFs. With prices currently low, it appears that an raise in demand for BTC could strengthen a resumption of the current bull market.
Bitcoin price in brief
At the time of writing, Bitcoin is trading at around $60,790, reflecting a 1.6% decline in the past week. The market leader has lost almost 6% over the past week, according to CoinGecko data.
The price of BTC thickens around the $60,000 mark on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
