Bitcoin Market Update: On-Chain Signals Point to Downturn as Demand Cools

Key Points:

• On-chain signals show that Bitcoin has entered the bear market phase.
• There is a risk of moving down to $70,000 due to reduced demand and conservative market behavior
• It has been observed that the cycle is now being driven more and more by demand dynamics and less by halving events.

CryptoQuant has pointed out that Bitcoin is moving into a bear market since important demand variables are weakening, thus retarding the momentum that was boosting prices.

Recent on-chain action indicates that the growth of demand for Bitcoin has fallen below its baseline level, and this has traditionally meant the entrance into bear markets. It has been observed that this indicates the primary drivers of the upswing have finished their work.

Earlier stages of the process were aided by various large demand catalysts such as U.S. spot Bitcoin ETFs, political and macro events, and bitcoin allocations to publicly listed companies. Current information shows that the above-demand drivers are no longer growing at the same rate.

With the growth in demand slowing, the prospects for Bitcoin corrections over longer periods are higher than for pullbacks. Based on an analysis by CryptoQuant, the current market has absorbed all the additional pressures within the past two years, with little that could work as buffers against volatility.

In terms of pricing, some circles have noted that around $70,000 may represent a potential medium-term level of support. In a broader correction, levels around $56,000 may not be entirely impossible in a deeper correction, though it would represent a smaller correction than in previous bear cycles.

Institutional behavior has also changed. U.S. spot Bitcoin ETFs have recently decreased their net position, while growth in major Bitcoin-holding wallets has decelerated, indicating a more conservative approach by funds and treasuries.

The data on derivatives continues to confirm this type of defense strategy. The funding rates in perpetual futures contracts are at multi-year lows, indicating a lack of trader enthusiasm to fund long positions.

Although the outlook has softened, market predictions still have split opinions. While some analysts stick to their projections of a price target, CryptoQuant highlights that Bitcoin’s larger four-year cycle, which is being largely determined by demand, still has fragile market conditions until a new driving force enters the market.