Buckle up Bitcoin(BTC) enthusiasts, because retail investor demand for the world’s most famous cryptocurrency has hit a five-month low. This news comes courtesy of CryptoQuant author Axel Adler, who analyzed on-chain data revealing a 17% drop in monthly demand among retail investors (those transferring less than $10,000).
But hold on a second, before you hit the panic button, there might be a silver lining. Here’s why: This slump eerily echoes a similar scenario back in January, where demand dropped to -18%. Shortly after, Bitcoin skyrocketed a whopping 75% in just two months, fueled by the launch of the first-ever spot Bitcoin ETFs in the US. That surge culminated in Bitcoin reaching its all-time high of $73,679 in mid-March.
Adler, recognizing a potential pattern, highlights the swift responsiveness of retail investors to market shifts. This aligns with his previous observation in May, where a 31% demand drop preceded a surge in interest for GameStop (GME) and Ether (ETH), potentially linked to the initial approval of Ether ETFs.
So, what’s causing the current dip in retail demand for Bitcoin? Analysts point to a confluence of factors, including the US Consumer Price Index (CPI) – a key inflation indicator. When inflation dips, riskier assets like Bitcoin tend to gain appeal as traditional savings accounts and fixed deposits offer less attractive returns due to lower interest rates.
However, for Bitcoin to reach new highs, things need to get specific. According to 10x Research head researcher Markus Thielen, the upcoming CPI data, due on June 12th, needs to show a significant drop to 3.3% – a tall order considering current economic trends.
As of June 11th, Bitcoin dipped below its November 2021 high of $69,000, a level closely watched by traders. It’s currently trading around $67,350, reflecting a 3.19% decline in the last 24 hours. This sudden drop liquidated over $52 million in long positions, although Open Interest (OI) remains above the crucial $35 billion mark.
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Despite hopes for a swift rebound above $70,000, Bitcoin(BTC) has yet to deliver. Interestingly, futures data suggests traders aren’t overly optimistic about a near-term recovery, with over $2 billion in short positions poised to capitalize if the price continues to slide.
With the crucial CPI data looming on June 12th, the coming days will be interesting for Bitcoin(BTC). Will retail investors jump back in, or will the wait for a significant inflation drop continue to dampen demand? Only time will tell.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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