Bitcoin's Rally Falters as Demand Wanes and Network Activity Slows

Bitcoin's recent rally, fueled by optimism surrounding the U.S. presidential election, has begun to falter. According to CryptoQuant analysts, the cryptocurrency could drop to $86,000 as demand wanes and network activity slows.

CryptoQuant data indicates a significant decline in demand growth for Bitcoin, with inflows to spot BTC exchange-traded funds (ETFs) disappearing. The Inter-exchange Flow Pulse, which tracks BTC movement between exchanges, also signals weakness, with BTC transfers to Coinbase declining below their 90-day moving average.

Stablecoin growth, a key driver of crypto market rallies, has also lost momentum. Although the total stablecoin market cap recently reached a new all-time high, the pace of expansion has slowed significantly. The 60-day average change in USDT's market capitalization has plunged by over 90% since mid-December, indicating a lack of fresh capital entering the market.

Muted blockchain activity on the Bitcoin network further underscores the warning signs. Bitcoin's network activity has slumped to its lowest level in a year, with the Bitcoin Network Activity Index down 17% from its November 2024 peak and falling below its 365-day moving average for the first time since July 2021.

After hitting a new record of $109,000 in January, Bitcoin has struggled to maintain its momentum and has been trading in a narrow range above $90,000. The broader crypto market sentiment has been battered by highly controversial memecoin launches in recent weeks.

As Bitcoin enters the final stretch of its weekly cycle, well-followed trader Bob Loukas notes that the sentiment reset is almost complete. While BTC could find a bottom of the corrective phase in the near future, it could break below the $90,000 range-low in doing so.