Bitcoin (BTC) rebounded from a recent dip to $93,000; however, the cryptocurrency faces ongoing downside pressure with a potential further decline to $86,000, according to CryptoQuant analysts. Factors such as decreasing demand, reduced blockchain activity, and limited liquidity inflows contribute to the risk of a deeper pullback.
Bitcoin demand, which surged in late 2024 following easing regulatory concerns linked to Donald Trump's election victory, is now experiencing a downturn.
Recent data from CryptoQuant indicates that demand has decreased significantly, with growth falling to 70,000 BTC from a peak of 279,000 BTC on December 4.
Inflows to spot BTC exchange-traded funds (ETFs), a common feature of previous bitcoin rallies, have not been forthcoming, with the past two weeks recording consistent net outflows. November and December saw daily purchases reaching as high as 18,000 BTC.
The CryptoQuant Inter-exchange Flow Pulse, which monitors BTC movements between exchanges, also highlights market weakness. Transfers to Coinbase, a key indicator of U.S. spot demand, are now below their 90-day moving average.
The growth of stablecoins, which often fuel crypto market rallies, has also slowed. Although the stablecoin market cap recently surpassed $200 billion, its expansion pace has greatly decreased. The 60-day average change in the market capitalization of USDT, the largest stablecoin, has plummeted over 90% since mid-December, dropping from over $20 billion to $1.5 billion. This deceleration suggests a lack of new capital flowing into the market.
Muted activity on the Bitcoin network is another cautionary sign, according to CryptoQuant analysts. The Bitcoin Network Activity Index, which measures network activity, has fallen to its lowest point in a year. It is down 17% from its peak in November 2024 and is now below its 365-day moving average for the first time since July 2021, when China banned BTC mining. Fewer transactions indicate reduced investor interest and speculative activities.
After reaching a record high of $109,000 in January due to optimism surrounding Donald Trump's presidency, BTC has struggled to maintain its position, trading within a narrow range above $90,000. The broader crypto market sentiment has been impacted by the controversial launch of memecoins such as TRUMP and LIBRA, which have absorbed speculative capital.
Prominent trader Bob Loukas noted that the sentiment reset is nearing completion as bitcoin approaches the end of its weekly cycle. He suggested that BTC might soon find a bottom in this corrective phase, although it might dip below the $90,000 threshold in doing so. "More a question of if the bottom of the range (90k) can hold or not," Loukas commented in an X post. "Doesn't matter, sentiment resetting occurs either way."
Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or legal advice. Always conduct your own research or consult a professional when dealing with cryptocurrency assets.