Overview

Bitcoin has been trading within a narrow band around $96,000, but several indicators point towards the risk of a larger retracement to $86,000, according to CryptoQuant analysts. The report indicates that BTC demand, network activity, and liquidity are stagnating, contributing to downward pressure on prices. Trader Bob Loukas noted that the sentiment reset is nearing completion as BTC enters its weekly cycle’s final phase.

Insights

• Bitcoin (BTC) quickly recovered from a drop to $93,000, yet continued downside pressure suggests a potential pullback to $86,000.
• There are signs of weakening demand, decreasing blockchain activity, and a lack of liquidity inflows toward cryptocurrency, which could push BTC lower.

Demand that surged in late 2024 due to optimistic political changes is now receding. CryptoQuant data shows a recent plunge in demand growth to 70,000 BTC from a peak of 279,000 BTC in early December.

Further Data

An alarming trend is noted in inflows to spot BTC exchange-traded funds (ETFs), which, historically during past rallies, have diminished significantly, now showing net outflows after substantial previous inflows.

Meanwhile, signals from CryptoQuant’s Inter-exchange Flow Pulse indicate a significant decline in BTC transfers to Coinbase, hinting at weak U.S. demand. Additionally, stablecoin market growth, a significant participant in crypto rallies, has slowed dramatically.

Market Sentiment

BTC recently hit a record $109,000 in January amid optimistic sentiments over political shifts, but has struggled to maintain its momentum, floating in a narrow range above $90,000.

The reset of market sentiment implies that BTC could find a bottom soon. According to Bob Loukas, the critical question remains whether the $90,000 range will hold or break.

“More a question of if the bottom of the range (90k) can hold or not. Doesn’t matter, sentiment resetting occurs either way.” - Bob Loukas