Understanding Bitcoin Cycles Through Demand: Insights from CryptoQuant

In the world of cryptocurrency, the analysis of Bitcoin cycles has gained attention. According to Julio Moreno, head of research at the analytics firm CryptoQuant, it's not price that defines these cycles, but rather the demand for Bitcoin.

Key Takeaways

Bitcoin cycles are more accurately defined by demand rather than price fluctuations.
The Apparent Demand indicator, which measures miner issuance against one-year dormant supply, offers insights into Bitcoin demand.
Recent trends show that Apparent Demand is declining, indicating bearish signals for the current cycle.
Both on-chain and off-chain metrics, including ETF activity, reveal muted demand for Bitcoin.

Bitcoin

The Recent Decline in Bitcoin Demand

In a recent update on platform X, Julio Moreno provided a fresh perspective on Bitcoin cycles. He pointed out that many analysts focus primarily on price movements to define these cycles, while the real focus should be on demand levels.

To measure this demand, Moreno utilizes the Apparent Demand indicator. This tool compares daily miner issuance (the amount of Bitcoin mined daily) against the changes in the one-year dormant supply—the total Bitcoin that hasn't moved in a year.

Miner issuance reflects the "production" of Bitcoin, while the one-year supply can be seen as the cryptocurrency’s "inventory." By analyzing these metrics together, Apparent Demand offers a clearer picture of Bitcoin's health.

Bitcoin Apparent Demand

The chart shared by Moreno illustrates the behavior of both the 30-day and one-year Apparent Demand indicators over the past decade.

Recent trends indicate that the value of Apparent Demand has recently dipped into negative territory on a monthly basis. As seen in the graph, previous Bitcoin cycles transitioned into bear markets when this metric reached the negative zone on both monthly and yearly scales.

Currently, while the annual Apparent Demand remains positive, it is trending downward. Should this decline continue, it may soon enter the negative zone, reflecting further bearish conditions.

Potential Bearish Signals for Bitcoin

Given the patterns observed in prior cycles, the existing structure of Apparent Demand currently appears bearish. It remains to be seen whether the yearly metric will also dip into the negative or if there will be a rebound indicating renewed demand.

Additionally, considering the rise of exchange-traded funds (ETFs), there are new avenues to assess Bitcoin demand. According to on-chain analytics firm Glassnode, recent figures show that the 30-day net flow related to US Bitcoin spot ETFs has remained negative. This suggests that demand from this market segment is also lacking.

Bitcoin ETFs

Bitcoin Price Movements

As for Bitcoin's price, it has recently stabilized around the $88,000 mark, as shown in the price chart from the last five days.

Bitcoin Price Chart

In summary, understanding Bitcoin cycles through the lens of demand rather than just price provides a more comprehensive view of market trends. Keep an eye on the demand metrics to gauge Bitcoin's ongoing performance.