CryptoQuant Head Reveals Reason Behind Bearish Bitcoin Trend

The head of research at CryptoQuant pointed to a decline in demand for absorbing Bitcoin at higher prices recently, which could explain the asset’s decline.

The virtual demand gauge for Bitcoin has recently turned red

In new mail On X, Julio Moreno, head of research at on-chain analytics firm CryptoQuant, looked at the recent BTC market dynamics from a different angle. “Instead of looking at the long-term distribution/spending of Bitcoin holders, I like to look at the other side of the trade,” Moreno noted.

Long-term holders here refer to BTC investors who have held their coins for longer than 155 days. This group is considered to include “HODLers” with high market conviction, so the distribution of them is often something analysts across the chain monitor.

As Maartunn, a CryptoQuant community analyst, explained in a separate report for X maillong-term Bitcoin holders have been involved in a significant amount of selling over the past month.

But that’s not the signal Moreno is focusing on. Instead, the head of CryptoQuant checks whether there is enough incoming demand to absorb the supply that long-term holders are selling at higher prices.

An indicator that can be useful for tracking this is virtual demand, which compares the difference between Bitcoin production and changes in its long-term stock. “Production” is the amount miners release on the network each day, while “inventory” is supply that has been inactive for more than a year.

Now, here’s a chart shared by Moreno that shows the trend in the 30-day and 1-year versions of virtual demand for Bitcoin over the past few years:

As shown in the chart above, virtual demand for Bitcoin has been in the red on a 30-day basis over the past few weeks, implying negative short-term demand for the cryptocurrency. “Is there enough demand to absorb supply at higher prices?” asked the analyst. “A few weeks ago, the answer was no, and that’s why we’re seeing prices falling.”

The story is a little different when it comes to the one-year virtual call, which has actually seen some growth recently, but the pace of its rise has been slow, and its value is still below the 90-day simple moving average (SMA).

The last time Bitcoin experienced an extended phase of negative 30-day virtual demand was during the bear phase in the first half of the year. It now remains to be seen whether something similar will follow this time as well, or whether demand will bounce back.