Bitcoin (BTC) price fell 5.42% in the last 24 hours to $57,151 on May 1, hitting a multi-week low. On-chain data suggests that a slowdown in Bitcoin demand growth and an increase in open sell positions may be the reasons for the recent decline. There is a possibility that BTC may hit a new low.
As CryptoQuant reports, BTC’s recent decline is due to a slowdown in demand, characterized by a decline in the growth of Bitcoin balances among perpetual holders, slowing demand for spot Bitcoin ETFs, and increasing short positions in the futures market.
Demand from perpetual holders (investors who only buy Bitcoin and do not sell it) fell 50% in April, from more than 200,000 BTC at the end of March to about 90,000 BTC, according to CryptoQuant data.
“Accelerating demand growth is necessary for prices to bottom out and eventually rise significantly.”
The chart above shows that this indicator has “reached similar levels to early March, when Bitcoin also experienced a meaningful correction” and fell 7% shortly after breaking its all-time high.
Whale demand has been declining since late March, and according to CryptoQuant analysts, BTC price corrections are typically caused by a slowdown in demand growth from large investors.
“Bitcoin whale demand growth (purple area) peaked at a monthly growth rate of 12% in late March and has now slowed to 6%.”
Analysts also said the slowdown in Bitcoin demand was evident due to a decline in spot ETF purchases in the US, which also added to sell-side pressure.
“Daily Bitcoin purchases through ETFs have now plummeted to essentially zero after peaking at over $1 billion in mid-March,” the report added. “A new wave of Bitcoin purchases from ETFs is needed to revive demand growth. ”
Another indicator the on-chain data analytics firm used to explain the slowdown in Bitcoin demand was “traders’ willingness to pay more to open buy positions,” as sell orders outpaced buy orders.
Bitcoin’s funding rate has fallen to its lowest level this year, indicating traders are not willing to “pay as much as before to open long positions.”
Instead, “the recent price decline was driven by traders who initiated short positions in anticipation of further price declines,” the report noted.
Analysts agree that this is a likely direction for the price of Bitcoin to fall.
The ongoing market correction has market participants wondering how low the Bitcoin price can go before a trend reversal occurs.
CryptoQuant analysts set a lower target within the $55,000 to $57,000 demand zone, which is “10% below the current trader’s cost base of $63,000.” Traders’ cost basis is known to support prices during bull markets.
“The current Bitcoin price is already below traders’ cost basis.”
For renowned analyst Scott Melker, $52,000 is the lowest level BTC price could rise to in the near term. Melker said the correction for bulls is still minimal because the daily RSI is not yet oversold.
“This is still only a 23% correction, which is very shallow in a bull market and consistent with other corrections in this run. “In this bull market, there has yet to be a 30-40% decline like in the past.”
Continuing, Bitcoin analyst Tuur Demeester found BTC trading at $60,409 and said that $50,000 could be the next stop for Bitcoin now that the $60,000 support has been lost.
Trader and analyst Mags said that if Bitcoin closes below $60,000 in the weekly period, traders “should expect a much deeper retracement to below $40,000.”
“So far in this cycle we have seen four declines of between 20 and 22 per cent. If we were to see something similar, a -22% correction from the local high would put us at $58,000 – $57,500.”
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.