The head of research at on-chain analytics firm CryptoQuant explained how demand forms the basis of a Bitcoin cycle, rather than price performance.
Apparent demand for Bitcoin has declined recently
In a new article on X, Julio Moreno, Head of Research at CryptoQuant, talked about Bitcoin cycles from a different perspective. “Most focus on price performance to define a cycle, when the question is what they should be looking at,” Moreno noted.
The analyst assessed “demand” for the cryptocurrency using the Apparent Demand Indicator, which compares miners’ daily issuance to changes in dormant supply over a year.
The first of these, miner issuance, is the amount that miners “raise” each day on the network by receiving block rewards. This metric essentially reflects the “production” of the asset. The one-year inactive supply, on the other hand, can be considered the “inventory” of the cryptocurrency.
So, apparent demand essentially compares the production of Bitcoin to the changes taking place in its inventory. Below is the chart shared by Moreno that shows trends in 30-day and 1-year versions of apparent demand over the past decade.
As the chart shows, the last few Bitcoin cycles all evolved into a bear market when apparent demand dipped into the negative region on both the monthly and annual time frames.
In the current cycle, 30-day apparent demand has recently dipped into the red zone, suggesting that monthly demand for the asset has been negative.
On the annual scale, the measure is still at a positive level, but its value follows a downward trend. If this decline continues, the indicator will soon fall into negative territory.
Given the trend of previous cycles, the current structure of apparent demand certainly looks bearish. However, it remains to be seen whether the annual version of the indicator will move into the red zone or whether it will rebound, signaling the return of demand.
Nowadays, spot demand is not the only way to measure demand for Bitcoin. With the advent of exchange-traded funds (ETFs), new off-chain demand has emerged in cryptocurrency this cycle.
As mentioned by on-chain analytics firm Glassnode in an article
BTC Price
Bitcoin has recently started to consolidate as its price is still hovering around the $88,000 level.
