Bitcoin’s recent price action has been accompanied by a significant drop in retail investor demand. This has sparked debate among analysts about whether this signals a potential downturn or a buying opportunity.
According to data shared with Cointelegraph on June 10th by CryptoQuant author Axel Adler, the average monthly change in Bitcoin demand from retail investors (those with up to $10,000 in transfer volume) has fallen to a five-month low of negative 17%.
Interestingly, Adler points out a similar drop in January (-18%) preceded a significant Bitcoin price surge. Back then, Bitcoin rose from $40,000 to $70,000, fueled by the approval of spot Bitcoin exchange-traded funds (ETFs) in the US and culminating in a new all-time high of $73,679 in mid-March.
Adler highlights the sensitivity of this investor group to market changes, suggesting they might be reacting to recent price volatility.
This isn’t the first time Adler has used this metric. Last month, he observed a 31% demand drop within 17 days before May 24th, coinciding with increased investor interest in GameStop (GME) and Ether, potentially fueled by the initial approval of spot Ether ETFs.
Several factors are believed to be contributing to the shift in Bitcoin demand. One theory suggests a connection to the US Consumer Price Index (CPI), a key inflation indicator. Lower CPI readings can make riskier assets like Bitcoin appear more attractive compared to traditional savings options that offer lower returns due to falling interest rates.
In May, 10x Research head researcher Markus Thielen suggested that Bitcoin could reach new all-time highs if the CPI reading on June 12th (released by the Bureau of Labor Statistics) falls below 3.3%.
On June 11th, Bitcoin dipped below its November 2021 all-time high of $69,000, a crucial level for many traders. As of writing, Bitcoin is trading at $67,350, reflecting a 3.19% decline over the past 24 hours (according to CoinMarketCap).
This sudden drop resulted in the liquidation of $52.87 million worth of Bitcoin long positions within the last day. However, Open Interest (OI), a metric reflecting total outstanding derivative contracts, remains above the significant $35 billion mark (data from CoinGlass).
Despite initial hopes for a quick rebound above $70,000 after dipping below it on June 8th, Bitcoin has yet to recover. Futures traders also seem to be cautious about a near-term recovery, with $2.14 billion in short positions potentially profiting if the price continues to decline.
The coming days will be crucial for Bitcoin as the CPI data release on June 12th could significantly influence investor sentiment. Whether the recent drop in retail demand signals a buying opportunity or a potential downturn remains to be seen.
