Bitcoin (BTC) has shown resilience following its recent dip to $93,000, but downside risks remain, with analysts cautioning that the cryptocurrency could see a deeper correction toward $86,000. According to CryptoQuant, weak demand, sluggish blockchain activity, and a slowdown in liquidity inflows could drag BTC prices lower in the coming weeks.
Despite Bitcoin’s strong rally in late 2024, fueled by optimism surrounding Donald Trump’s election victory and easing regulatory concerns, recent data suggests that demand is weakening, raising concerns about Bitcoin’s short-term price trajectory.
Weakening Demand and ETF Outflows Signal Market Caution
Bitcoin’s rally in late 2024 was largely driven by institutional adoption, fueled by the approval of spot BTC exchange-traded funds (ETFs) in the U.S. However, that momentum appears to be fading.
📉 Bitcoin Demand Decline:
- CryptoQuant data shows that Bitcoin demand has dropped significantly, falling from 279,000 BTC in early December to just 70,000 BTC in recent weeks.
- Spot BTC ETFs, which saw massive inflows in November and December, are now experiencing net outflows, signaling reduced investor appetite.
📉 Inter-Exchange Flow Weakness:
- CryptoQuant’s Inter-exchange Flow Pulse, which tracks BTC movement between exchanges, indicates that Bitcoin transfers to Coinbase—a key measure of U.S. spot market demand—have fallen below their 90-day moving average.
These indicators suggest lower institutional interest and weaker buying pressure, raising the risk of further price declines.
Stablecoin Growth Slows, Reducing Market Liquidity
Stablecoins are often used to facilitate cryptocurrency purchases, and their market capitalization serves as a proxy for new capital entering the crypto market.
🔻 Stablecoin Market Trends:
- The total stablecoin market cap recently hit an all-time high of over $200 billion, but the rate of expansion has slowed significantly.
- The 60-day average change in USDT’s market capitalization has plunged by 90% since mid-December, falling from $20 billion to just $1.5 billion.
With stablecoins serving as a primary source of liquidity for Bitcoin trading, this slowdown suggests that fresh capital inflows into the crypto market have diminished, potentially leading to increased price volatility.
Bitcoin Network Activity Hits Yearly Lows
Another bearish indicator is the drop in Bitcoin network activity, which has fallen to its lowest level in over a year.
📉 Bitcoin Network Activity Index:
- According to CryptoQuant, Bitcoin’s network activity has declined by 17% since its peak in November 2024.
- The metric has fallen below its 365-day moving average for the first time since July 2021, when China banned BTC mining.
- Fewer transactions indicate declining investor engagement and reduced speculative interest, both of which can weigh on BTC’s price.
Could Bitcoin Find a Bottom Soon?
🔸 After hitting a record high of $109,000 in January, Bitcoin has struggled to sustain its gains, trading within a narrow range above $90,000.
🔸 Sentiment in the broader crypto market has been impacted by highly controversial memecoin launches in recent weeks, draining speculative capital from major assets like BTC.
🔸 Veteran trader Bob Loukas believes that Bitcoin is approaching the final stretch of its weekly cycle, meaning a bottom could be near. However, he warns that BTC could still break below the $90,000 support level before a rebound occurs.
💬 Loukas’ Perspective:
“More a question of if the bottom of the range (90k) can hold or not. Doesn’t matter, sentiment resetting occurs either way,” Loukas stated on X (formerly Twitter).
Market Outlook: Key Levels to Watch
🔹 Immediate Support: $90,000 – If BTC fails to hold this level, a further drop toward $86,000 is likely.
🔹 Resistance Level: $97,000 – A sustained breakout above this level could signal renewed bullish momentum.
🔹 Long-Term Trend: Bitcoin’s macro outlook remains strong, but short-term volatility is expected as liquidity concerns persist.
While Bitcoin’s fundamentals remain intact, traders and investors should closely monitor liquidity inflows, ETF activity, and stablecoin growth for signs of market stabilization.
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