Unpacking Bitcoin Cycles: Demand, Not Price, Drives Market Phases

The traditional view of Bitcoin market cycles, often fixated on price movements, is being challenged. According to CryptoQuant's Head of Research, Julio Moreno, the true driver behind Bitcoin's cyclical nature is demand, a metric that provides a more nuanced understanding of market health.

The Apparent Demand Indicator Signals Bearish Trends

Moreno highlights the "Apparent Demand" indicator as key, a metric that juxtaposes daily miner issuance (new supply entering the market) against changes in the 1-year dormant supply (Bitcoin that has remained unmoved for a year, representing long-term holder behavior or "inventory"). Historically, when this indicator dips into negative territory on a monthly timeframe, it has correlated with Bitcoin entering a bear market phase. Recent data reveals a concerning shift: the 30-day Apparent Demand has recently turned negative, indicating a monthly decrease in demand for Bitcoin. While the annual Apparent Demand remains positive, it has been on a downward trajectory. Should this decline continue, the indicator could soon cross into the negative zone on a yearly basis, echoing patterns seen in previous bear markets. This suggests that despite Bitcoin's recent price consolidation around the $88,000 mark, the underlying demand picture is looking increasingly bearish.

Broader Demand Landscape: ETFs and On-Chain Activity

Beyond the Apparent Demand indicator, other demand metrics also paint a cautious picture. On-chain analytics firm Glassnode notes that the 30-day net flow related to US Bitcoin spot Exchange Traded Funds (ETFs) has also recently resided in negative territory. This indicates that institutional demand from these significant investment vehicles has been muted in the current cycle, further dampening overall market demand. The current market structure, as reflected by the Apparent Demand, exhibits bearish characteristics. The critical question remains whether the yearly demand metric will follow its monthly counterpart into the red, confirming a full-blown bearish cycle, or if renewed demand will emerge to spark a rebound. Investors are advised to look beyond simple price action and consider these underlying demand dynamics for a more comprehensive market perspective.