Why Has Bitcoin Seen Recent Bearish Trends? CryptoQuant Head Sheds Light
Bitcoin has been experiencing a bearish trend as its price falls below $56,000. The Head of Research at CryptoQuant, Julio Moreno, explains what could be causing this downward trajectory.
According to Moreno, the decline in Bitcoin’s price is simply due to a lack of demand growth. To illustrate this, he refers to the “Apparent Demand” indicator, which uses on-chain data to estimate the 30-day demand for BTC among investors.
The chart for this indicator shows that demand for Bitcoin was high earlier in the year but sharply declined towards zero after reaching its peak in April. Since then, the Apparent Demand has remained around this neutral level, contributing to the overall bearish trajectory of the cryptocurrency.
Another indicator mentioned by Moreno is the Bitcoin Bull-Bear Market Cycle Indicator, which combines various BTC indicators related to profit and loss to provide an overall market value. The graph reveals that when Bitcoin reached its all-time high, it was in the historical “Overheated Bull” region according to this indicator. After cooling off from that peak, the indicator signaled a “Bull” market, similar to January and February. However, the market transitioned to a “Bear” signal during the crash last month, with the indicator fluctuating between the two since then.
In the past week, the Bull-Bear Market Cycle Indicator has consistently remained in the Bear region, contributing to Bitcoin’s 6% drawdown during this period.
Moreno also highlights a crucial price level to monitor, which is the lower band of the average cost basis for BTC traders, currently around $55,500. If Bitcoin continues its decline, a retest of this level could have significant implications.
Currently trading around $55,900, Bitcoin is on the verge of retesting the cost basis level, raising questions about its future trajectory.
(Image credit: Dall-E, CryptoQuant.com, chart from TradingView.com)