Bitcoin price has been under significant downward pressure in the past few weeks, and this cryptocurrency researcher explains the role of demand in the market correction.
Apparent Demand for Bitcoin Is Falling – Is It a Cause for Concern?
In a recent post on Platform X, CryptoQuant’s head of research, Julio Moreno, said to explain How the recent Bitcoin price correction is related to the decline in demand for Bitcoin. This analysis is based on the clear demand measure for Bitcoin on the CryptoQuant platform.
Virtual demand calculation is often used in financial markets to evaluate demand by comparing production levels and inventory changes. Essentially, this metric provides a clear picture of whether demand is rising or falling.
In the case of cryptocurrencies, such as Bitcoin, apparent demand is calculated using the concept of inactive supply. This concept tracks the amount of Bitcoin that has not been moved or converted during a given period.
As Moreno explains, the chart below uses the one-year inactive supply as a “proxy for the stock.” This means that it monitors the amount of Bitcoin that has not been transferred or transacted for over a year.
Chart showing BTC apparent demand and price | Source: jjcmoreno/X
According to data from CryptoQuant, nearly 23,000 Bitcoin has flowed out of the one-year inactive supply in the last 30 days. This indicates a decline in demand for Bitcoin, as long-term investors appear to be choosing to offload and move their Bitcoin.
This drop in demand has several implications, especially on the value of the leading cryptocurrency. For example, the head of research at CryptoQuant pointed out that the drop in demand is one of the catalysts for the recent price correction.
Large inflows of Bitcoin from long-term holders into the market increase the available supply, putting downward pressure on prices. Furthermore, price declines can occur when buying pressure in the market is insufficient to absorb the additional supply.
CryptoQuant revealed in a weekly report that demand for Bitcoin fell significantly compared to the first quarter – after the launch of spot trading funds on the US exchange. With prices currently low, it appears that increased demand for Bitcoin could fuel a resumption of the current rally.
Bitcoin price at a glance
As of this writing, Bitcoin is trading at around $60,790, reflecting a 1.6% decline in the past week. According to CoinGecko data, the market leader is down nearly 6% in the past week.
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