Bitcoin Market Slump Traced to Cooling Demand amid Conflicting Indicators

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In the fluctuating world of cryptocurrency, recent drops in the market value of Bitcoin have sparked widespread speculation. According to market intelligence gathered by the on-chain analytics platform, Glassnode, bitcoin’s depreciation to below the $70,000 mark can be traced back to a cooling demand.

In detailed reports revealing the current status of the Bitcoin market, Glassnode posits how the influx of new capital into Bitcoin’s wallets have largely decelerated from its highest point. This is a crucial observation, drawn from the Realized Cap metric – a measurement that captures the last traded value of each Bitcoin. Presently, the conglomerate worth of Bitcoin, as indicated by the Realized Cap, stands at a colossal $574 billion.

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Maintaining a bird’s-eye view on the injection and withdrawal of capital into Bitcoin reveals that there has been a discernible downturn in liquidity since the cryptocurrency marked its all-time high of $73,750. This slowdown is starkly contrasted by the Bitcoin rush that transpired leading up to the record-breaking high. Glassnode reports noted how the cash flow into Bitcoin at the time was incredibly robust, amassing an impressive daily value of $3.38 billion.

Moving with the current trends, however, the Realized Cap has shown a return to a more balanced position, remaining in beneficial, profit-ridden territory. Despite the noticeable drop in demand, bitcoin still managed to inspire a resurgence, primarily stemming from the reduction in mature investors selling off their assets.

Glassnode highlights a positive trajectory for Bitcoin, based on these observations, stipulating that an increase in capital influx would offer a more significant boost to the cryptocurrency’s growth. Recent data reflect the revival of the Spot Bitcoin ETFs, which have now snapped their streak of net outflows, reporting stellar net inflows.

Investment tracking sourced from Farside Investors revealed that the funds have already recorded nearly $700 million in net influxes over the past week. Notably, the Bitcoin ETFs documented a net inflow of $305.7 million on May 21, marking BlackRock’s iShares Bitcoin Trust (IBIT) most profitable day, with the trust amassing $290 million.

The data provided by Glassnode unpack a few other pivotal on-chain metrics, shedding light on some promising indicators for Bitcoin’s future growth. A noteworthy takeaway is the significant decrease in the Bitcoin sell-side risk ratio, indicating a semblance of equilibrium that has developed through this correction.

In efforts to examine market volatility, the spread between the maximum and minimum prices over the past 60 days were analyzed. The findings suggest that volatility is gradually reducing to levels typically observed after extended consolidations, and in anticipation of significant market movements.

Apart from these key insights, Glassnode indicated that 2.14M BTC of the short-term holder’s supply, currently standing at 3.36M BTC, was subject to an unrealized loss following the recent market correction. This suggests that the bulk of the Bitcoin held by short-term investors are at an unrealized loss, thereby decreasing the risk of the market becoming top-heavy.