Bitcoin has again dropped below $59,000, leaving investors grappling with challenging market conditions. While rapid declines often see quick rebounds, prolonged pullbacks over several months have severely impacted investor sentiment. The question arises: What is driving this environment that also diminishes risk appetite? What has shifted since April? Let’s delve into the details.
Why Are Cryptocurrencies Not Rising?
There could be various reasons for this scenario, such as excess supply and macroeconomic issues. However, it’s puzzling to see Bitcoin’s weak performance when Gold is hitting its all-time high along with stock markets. Data analysis firm CryptoQuant offers some answers in their latest market report.
According to Ki Young, CEO of CryptoQuant, the market exhibits long-term bullish sentiment alongside short-term volatility. Yet, the persistent weakness is attributed to insufficient BTC demand. Their analysis shows that visible demand, calculated by the difference between the daily total Bitcoin block subsidy and the daily change in Bitcoin holdings for over a year, is notably low. From April’s peak of $70,000 to a significant drop by August, demand has decreased. ETF channel demand for Bitcoin also plummeted, contributing to the overall demand shortfall.
Bitcoin Demand Shortfall
The visible demand turned from 496,000 in 30 days to a negative growth of 25,000. Supporting this, the Coinbase BTC price premium dropped from 0.25% at the start of the ETF launch to a mere 0.01% today. This decline reflects the weakened demand in the US channel. Daily volume data further validates the general market negativity.
Steps for Revival
– Interest rate cuts could potentially revive demand in the US channel.
– Political promises, such as those from Trump regarding crypto, could act as a catalyst.
– Experts anticipate major movements in the market by the last quarter of the year.
Conclusion
While the cryptocurrency market faces a downturn, the lack of visible demand remains a key issue. The revival of interest and demand, especially in the US, is crucial for a potential recovery. Stakeholders are watching closely to see if upcoming economic or political events will trigger a positive shift.