Crypto investors have had a kind of deja vu as Bitcoin prices have barely moved for months. But data shows that demand for the cryptocurrency is gradually recovering, which could soon be reflected in prices. Bitcoin has struggled this year around $70,000, but the struggles were exacerbated last month when miners began selling large amounts of Bitcoin to cover operational costs following weeks of sluggish transaction fees and a sharp cut in miners’ block rewards during the halving. Some large mining companies have begun using their Bitcoin reserves to earn yield or hedge risk. Now, according to CryptoQuant, the forced sales, often referred to as “miner capitulation,” have seen Bitcoin network hashrate (the total computing power used by miners to process transactions) fall 7.6%, reaching levels comparable to December 2022, the bottom of the cycle after FTX collapsed. “Miners’ capitulations have historically signaled price troughs because they signal that the price is too low for the least efficient miners to make a profit,” Julio Moreno, head of research at CryptoQuant, told CNBC. “After the halving, the network hash rate dropped by about 7% to 12% to mark the trough and preceded the price rally, which is now down 7.7%.” However, any rise in bitcoin’s price depends on increased demand for bitcoin. Demand typically increases before it shows up in the price, he added. Demand has slowed this year after rising 66% in the first quarter, but that trend is reversing, according to CryptoQuant data. “Currently, whale demand is growing 6% month-on-month,” Moreno said. “This is usually a high growth rate, so we’re already in an environment where demand is growing. … In February and March of last year, the price spiked as demand growth exceeded 6% month-on-month.” He added that in the past, “demand has peaked at 10-12% month-on-month, so there is still room to rise.” Bitcoin has fallen 8% over the past three months, but is up 44% year-to-date. Many investors are confident that Bitcoin has more catalysts to rise, such as a spot Ethereum ETF, lower U.S. interest rates, and clarification of industry rules after the U.S. presidential election. Moreover, the peak of the Bitcoin cycle tends to be as much as 18 months away from the halving. “What we learned from past cycles is that you can’t expect anything right after the Bitcoin halving,” said Antoni Trenchev, co-founder of Nexo. “Bitcoin barely moved for four to five months after the 2016 and 2020 halvings, and had to wait six weeks in 2012 for prices to pick up steam,” he said. “Given that the 2024 halving occurred in April, it would not be surprising to see further plateaus,” he added. “Bitcoin could still reach $100,000 in 2024, as the consolidation period since March lays the foundation for the next phase of growth.”
Subscribe to Updates
Subscribe to our newsletter and stay updated with the latest news and exclusive offers.
Investor demand for Bitcoin is rebounding despite stagnant prices, data shows
Related Posts
Add A Comment
Services
Subscribe to Updates
Subscribe to our newsletter and stay updated with the latest news and exclusive offers.
© 2024 Business Investopedia. All Rights Reserved.