Bitcoin’s (BTC) price has experienced a significant drop of 5.42% in the past 24 hours, reaching a new multi-week low at $57,151 on May 1. On-chain data suggests that a decrease in Bitcoin demand growth and an increase in open short positions may be the main factors behind this recent decline. It is possible that BTC will continue to reach new lows in the near future.
According to reports from CryptoQuant, BTC’s decline can be attributed to a slowdown in demand, characterized by a decrease in Bitcoin balances among long-term holders, a slowdown in spot Bitcoin ETF demand, and an increase in short positions in the futures market. Data from CryptoQuant shows that demand from long-term holders dropped by 50% in April, from over 200,000 BTC in late March to about 90,000 BTC.
The chart provided by CryptoQuant indicates that this metric has reached levels similar to early March when Bitcoin experienced a significant correction, dropping 7% right after reaching its all-time highs. Demand from large investors, also known as whales, has been declining since late March, and according to analysts at CryptoQuant, BTC price corrections are usually driven by slower growth in demand from these investors.
The analysts also noted a slowdown in Bitcoin demand based on declining purchases from spot ETFs in the US, which adds to the selling pressure. The report states that the daily purchase of Bitcoin from ETFs has dropped to almost zero, after peaking at over $1 billion in mid-March. The report suggests that a new wave of Bitcoin purchases from ETFs is needed to stimulate demand growth.
Another metric used by CryptoQuant to explain the slowdown in Bitcoin demand is the traders’ reluctance to pay higher prices to open long positions, as sell orders exceed buy orders. The funding rate for Bitcoin has reached a year-to-date low, indicating traders’ unwillingness to pay as much as before to open long positions. Instead, traders are opening short positions, expecting further price declines.
Analysts agree that the direction for Bitcoin price is likely to be downwards. CryptoQuant analysts have set a lower target within the $55,000 to $57,000 demand zone, which is 10% below the current cost basis of traders at $63,000. Scott Melker, a popular analyst, believes that $52,000 is the lowest BTC price can go in the short term, considering that the correction is still mild for a bull market based on the daily RSI not being oversold. Tuur Demeester, another Bitcoin analyst, has spotted BTC trading at $60,409 and suggests that $50,000 could be the next support level now that $60,000 has been lost. Trader and analyst Mags stated that if Bitcoin closes below $60,000 on the weekly timeframe, traders should expect a much deeper retracement, potentially reaching $40,000 or even lower.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and analysis before making any investment or trading decisions.