3 months ago
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The Bitcoin (BTC) market appears to be now experiencing a concerning trend, according to the latest report from an on-chain data provider, CryptoQuant. In the report, CryptoQuant discloses a notable slowdown in the growth of whale holdings, which refers to the accumulation of Bitcoin by large-scale investors.
The report reveals that the implication of this trend may be quite negative for BTC. This is because, usually, Bitcoin whales, who hold substantial amounts of BTC, have a considerable influence on the market.
When these large holders accumulate, it generally signals confidence in the asset, often leading to price appreciation. However, the current decline in this accumulation suggests that these key market players may be becoming more cautious, raising concerns about the potential for further Bitcoin price declines.
Signaling A Bearish Outlook
According to CryptoQuant, the monthly growth rate of whale holdings has dropped from 6% in February to just 1%. This decline is seen as a bearish indicator for Bitcoin’s price, as historical data suggests that a growth rate of more than 3% in whale holdings typically correlates with rising BTC prices.
BTC on-chain metric. | Source: CryptoQuant
In addition to the decline in whale holdings, CryptoQuant’s report also touched on the broader concept of “apparent demand” for BTC. This metric is calculated as the difference between the daily total BTC block subsidy and the daily change in the number of BTC that have not been transferred in a year or more.
The report notes that apparent demand has significantly decreased since early April, when BTC was trading at $70,000. The 30-day growth in apparent demand reached 496,000 Bitcoin, the highest level since January 2021.
However, this growth has turned negative, with a decline of 25,000 Bitcoin. So far, the correlation between declining apparent demand and the plunge in BTC price has been quite evident.
As demand has waned, Bitcoin’s price has dropped from around $70,000 in early June to a low of $49,000 by August 5, the report disclosed.
CryptoQuant further suggests that for BTC to recover, there would need to be a renewed expansion in apparent demand. Without this increase in demand, the market may continue to face downward pressure, making it challenging for Bitcoin to regain its previous highs.
A Closer Look At Bitcoin’s Market Premium
The CryptoQuant report also highlights another key indicator: the price premium for BTC trading on Coinbase. Early in 2024, this premium hit 0.25%, aligning with strong demand for BTC and large purchases from exchange-traded funds (ETFs).
However, the premium has been plunging ever since, standing at just 0.01%. According to CryptoQuant, this decline in the Coinbase premium is another sign of “weakening demand” for BTC in the US market.
Featured image created with DALL-E, Chart from TradingView
