Bitcoin Cycle Defined by Demand, Not Price: CryptoQuant Head Says

Overview

The head of research at CryptoQuant, Julio Moreno, has presented a new perspective on Bitcoin cycles, emphasizing the importance of demand over price performance. Recent observations indicate a decline in Bitcoin’s apparent demand, which could have significant implications for the cryptocurrency’s market behavior.

Demand vs. Price Performance

Julio Moreno, the head of research at CryptoQuant, has articulated that the defining factor of Bitcoin cycles should be demand rather than price movements. He points out that many analysts tend to focus predominantly on price performance when evaluating the state of Bitcoin, but he argues that demand is a more critical metric to consider.

To assess the demand for Bitcoin, Moreno utilizes the Apparent Demand indicator. This metric compares daily miner issuance, which represents the amount of Bitcoin mined each day through block rewards, to changes in the 1-year dormant supply. The miner issuance reflects the asset’s production, while the dormant supply can be viewed as the cryptocurrency’s inventory. Therefore, the Apparent Demand indicator essentially measures the relationship between Bitcoin production and its inventory changes.

Moreno shared a chart illustrating trends in the 30-day and 1-year versions of the Apparent Demand indicator over the last decade. The data reveals a consistent pattern: previous Bitcoin cycles have transitioned into a bear market when the Apparent Demand has fallen into negative territory on both monthly and yearly timeframes. Currently, the 30-day Apparent Demand has recently dropped into the negative zone, indicating a decrease in monthly demand for Bitcoin. While the annual measure of this demand remains positive, it has been trending downward. Should this decline persist, it is likely that the yearly measure will also enter negative territory.

This situation raises concerns, particularly when compared to historical patterns. The current structure in Apparent Demand appears bearish, and the future trajectory of the yearly metric remains uncertain. There is a possibility that it may cross into negative territory or rebound, which could indicate a resurgence in demand.

In addition to on-chain demand, Moreno notes the emergence of off-chain demand due to the introduction of exchange-traded funds (ETFs). This development has created new avenues for investment in Bitcoin. However, on-chain analytics from Glassnode indicate that the 30-day net flow related to U.S. Bitcoin spot ETFs has recently remained in negative territory, suggesting that demand in this segment has also been subdued.

From author

The insights from Julio Moreno highlight a crucial perspective in understanding Bitcoin’s market dynamics. By focusing on demand indicators rather than solely on price performance, analysts and investors can gain a clearer picture of the underlying health of the Bitcoin market. The decline in apparent demand, coupled with the mixed signals from on-chain and off-chain metrics, underscores a pivotal moment for Bitcoin as it navigates its current cycle.

Impact on the crypto market

• The decline in the 30-day Apparent Demand indicates a potential bearish trend for Bitcoin.
• The annual Apparent Demand is trending downwards, raising concerns about future market movements.
• The muted demand from U.S. Bitcoin spot ETFs suggests a lack of investor enthusiasm in this segment.
• Previous cycles show a clear pattern where negative demand correlates with bear markets, which could signal upcoming challenges for Bitcoin.
• Understanding demand metrics may provide a more accurate framework for predicting Bitcoin’s market behavior than price alone.