Bitcoin Retail Demand Rebounds, Signaling Potential Price Rebound

Bitcoin's retail demand levels have returned to the neutral zone, raising questions about the cryptocurrency's near-term direction. Despite a 2.3% drop in price over the past week, pushing BTC's value further from its January all-time high, analysts are observing signs of renewed interest from retail investors.

CryptoQuant analyst Darkfost has highlighted a promising shift in Bitcoin's retail demand metrics. The 30-day demand change has climbed back into the neutral zone around 0%, recovering from a highly negative -21% seen late last year. This is the first time since 2021 that retail demand has shown such a notable turnaround, historically linked to eventual price rebounds.

In the past, periods of recovering retail demand have been associated with price rebounds. For instance, in July 2024, retail demand reached a similar low point before beginning to recover. Although it took roughly three months for Bitcoin's price to respond positively, the subsequent upward movement demonstrated the impact of growing retail interest.

However, despite the positive signs from retail demand, overall network activity and investor sentiment tell a more cautious story. Darkfost revealed a downward trend in the number of active Bitcoin wallets and transactions used for deposits and withdrawals. The accumulation of Bitcoin by spot ETFs has also slowed, with minor outflows suggesting a more hesitant investor base. Additionally, the number of unspent transaction outputs (UTXOs) is decreasing at a pace reminiscent of previous market corrections.

Investor sentiment has been weighed down by broader macroeconomic and geopolitical factors. While initial bullish sentiment was buoyed by optimism surrounding Trump's election and the possibility of favorable US crypto regulations, no substantial policy changes or legislative actions have yet emerged. Global trade tensions and risk-averse market behavior continue to dampen enthusiasm, with earlier bullish narratives already factored into Bitcoin's price. The market will likely require new catalysts or improved conditions to regain upward momentum.