Bitcoin Selling Pressure Subsides as Demand Stabilizes: CryptoQuant
The landscape of Bitcoin trading is witnessing a significant shift as selling pressure decreases, while demand for the cryptocurrency begins to find its footing, according to recent on-chain data and market analysis. This change is particularly evident in the activities of short-term Bitcoin holders and the stabilization of balances on over-the-counter (OTC) desks.
In a recent burst of market enthusiasm, Bitcoin’s price vaulted over the $60,000 mark, eventually reaching into the $67,000 territory. This spike has been largely attributed to unexpectedly lower inflation rates in the United States, sparking renewed interest and optimism among investors and traders alike.
Despite the exciting price movements, a report from CryptoQuant highlights an essential factor contributing to this rally: a noticeable dip in the selling pressure that has previously hampered the cryptocurrency’s growth. Yet, while the decrease in selling pressure is a positive sign, it’s important to note that the demand for Bitcoin is still in a phase of stabilization rather than experiencing rapid growth.
Analysis of on-chain data reveals that the decline in Bitcoin selling pressure can be traced back to two main sources: the on-chain behavior of short-term holders and the current state of balances held on OTC desks. Short-term Bitcoin holders, who are often quick to sell during price rallies, are currently seeing low to negative profit margins. This is a stark contrast to the high margins seen in early March, which led to increased selling pressure. Now, with much of their potential profits eroded, these traders are facing unrealized losses, which historically tends to coincide with local price bottoms.
Similarly, the stabilization of Bitcoin balances on OTC desks since late April provides a clear indication that the supply of Bitcoin from market participants has lessened. This shift followed a period where the balance on OTC desks climbed significantly in March, coinciding with Bitcoin reaching an all-time high of $73,000. Since then, the balance has remained relatively flat, suggesting a decrease in selling pressure from these desks.
Another factor to consider is the current state of miner profitability, which has fallen to levels not seen since March 2020, following the COVID market crash. Low profitability among miners has historically been associated with price bottoms, providing further evidence to suggest that the market could be stabilizing at its current levels.
As for demand, indicators show a slow but steady increase, particularly among permanent holders and large investors. This trend suggests a growing interest and confidence in Bitcoin’s long-term value. However, for Bitcoin’s price rally to be sustained, demand needs to see a stronger uptick. A revival in demand could potentially be driven by the spot Bitcoin exchange-traded fund (ETF) market and other investment funds dedicated to Bitcoin.
CryptoQuant analysts believe that the market needs a new influx of purchases from spot Bitcoin ETFs to kick-start demand growth. Recent trading days have shown promising signs, with these funds recording total inflows exceeding $560 million. This surge in interest towards Bitcoin ETFs and other investment vehicles could be the catalyst needed for sustained demand and price stability in the Bitcoin market.
In conclusion, while the reduction in selling pressure is a promising development for Bitcoin, the cryptocurrency’s market dynamics are still finding equilibrium. Balanced demand growth, alongside cautious optimism from investors, will be crucial for maintaining the current momentum and fostering a stable upward trajectory for Bitcoin’s price.
