Bitcoin Faces Potential Further Correction as Demand, Liquidity Weaken

Bitcoin’s recent retreat to $93,000 marks a significant pullback amid deteriorating market fundamentals. CryptoQuant analysis suggests the leading cryptocurrency could face additional downward pressure unless key metrics improve.

The cryptocurrency, which recently touched a one-month low, may test support levels near $86,000 according to analysts. This bearish outlook stems from several concerning trends in market data.

Demand for Bitcoin has plummeted dramatically since the post-election surge in November-December 2024. The demand indicator has fallen precipitously from 279,000 on December 4 to just 70,000 currently, representing a 75% decline.

This weakening demand appears in ETF flows as well. Bitcoin ETFs have shifted from peak inflows of 18,000 BTC to net outflows of 1,000 BTC, signaling waning institutional interest. CryptoQuant’s Inter-exchange Flow Pulse further confirms declining spot demand in the U.S. market as fewer bitcoins move to Coinbase from other exchanges.

Liquidity metrics tell a similar story. Despite stablecoins reaching a record $200 billion market capitalization, the growth rate has substantially slowed. USDT’s 60-day market cap change has contracted by 92%, falling from $20.4 billion in mid-December to just $1.5 billion today.

Network activity has also reached its lowest point in a year, dropping 17% from November peaks. CryptoQuant’s Bitcoin Network Activity Index has fallen below its 365-day moving average for the first time since China’s 2021 mining ban.

The combination of these factors—weakening demand, slowing liquidity inflows, and declining network usage—creates a challenging environment for Bitcoin price stability. Without improvement in these fundamental indicators, the cryptocurrency remains vulnerable to further corrections.

Investors facing this uncertain landscape may benefit from reassessing their digital asset strategies. Rather than reacting to short-term market movements, the current environment calls for measured risk management and informed decision-making based on these fundamental metrics.