Bitcoin
Demand Growth for Bitcoin Spikes: What Does It Mean?
Analysts at market intelligence platform CryptoQuant have identified an increase in demand for bitcoin (BTC) from large investors and permanent holders. While this could mean many things for the crypto industry, it is considered a positive sign by the laws of demand and supply.
In the latest CryptoQuant weekly report, market experts said that accelerating demand growth for BTC is necessary for a sustainable price recovery. Hence, BTC could soon witness a substantial price increase.
Demand growth for Bitcoin accelerates
CryptoQuant found that BTC traders’ selling pressure decreased as they finished taking profits. Unrealized profit margins currently hover around 3%, compared to 69% in early March, and analysts expect much less selling pressure from traders for now.
Although selling pressure remains low, demand is increasing. The acceleration in demand for BTC is evident in the recovery of inflows into the US Bitcoin exchange-traded fund (ETF) spot market.
These investment vehicles have I have been in a 19-day series of inflows since mid-May and recently recorded hundreds of millions of dollars in inflows. CryptoQuant said total ETF holdings grew from 819,000 on May 1 to more than 859,000.
Bitcoin whales are not left out of the wave of demand, as they have added more than US$1 billion to the network. This group of investors records a monthly demand growth rate of 4.4%, the fastest since mid-April.
The current activity of Bitcoin whales is similar to their movement on the network in 2020, before BTC rose from $10,000 to $70,000. At the time, BTC hovered around $10,000 for six months with high activity on the network, later identified as over-the-counter trades.
No sustained rally yet
Furthermore, BTC permanent holders have accumulated more than 70,000 in the last 30 days, recording the biggest increase since late April. Increased demand from these market participants is often correlated with higher prices.
Interestingly, demand for Ether (ETH) is seeing the same level of growth as BTC, especially since the US Securities and Exchange Commission approved the launch of Ethereum ETFs in sight. Daily purchases by permanent holders and the growth of investors’ total ETH holdings have increased significantly.
However, CryptoQuant analysts were unable to sustain a price rally for either BTC or ETH because stablecoin liquidity has not yet recovered its growth trajectory. An increase in stablecoin liquidity often accompanies market rallies.