Bitcoin has rapidly recovered after a steep decline, but analysts warn of a possible further drop to $86,000. Let's consider the key factors affecting the current situation.
Impact of Political Climate
Following Donald Trump's election victory in 2024, Bitcoin demand surged, fueling optimism about a more favorable regulatory environment. However, that demand has significantly subsided recently. According to CryptoQuant data, BTC demand growth has slowed from a peak of 279,000 BTC on December 4 to just 70,000 BTC recently.
Economic Indicators: What the Numbers Say
Inflows into spot Bitcoin ETFs, which were key drivers of previous rallies, have also disappeared. Over the past two weeks, these ETFs have recorded steady net outflows, indicating a shift in investor sentiment. Stablecoin growth, which usually fuels crypto market rallies, has also slowed. While the total stablecoin market cap recently reached an all-time high of over $200 billion, the pace of expansion has slowed significantly. The 60-day change in market cap of the largest stablecoin, Tether (USDT), has fallen by over 90% since mid-December, pointing to a lack of fresh capital.
Future of Bitcoin: Prospects and Challenges
Muted blockchain activity is another warning sign. CryptoQuant’s Bitcoin Network Activity Index has fallen to a one-year low, down 17% from its November 2024 peak. Lower trading volumes suggest declining investor participation and waning speculative interest, further weighing on BTC prices. After reaching an all-time high of $109,000 in January amid optimism surrounding Trump's presidency, Bitcoin has struggled to maintain its momentum, trading in a narrow range above $90,000.
Although Bitcoin has recently regained some ground, the situation remains uncertain. Diminishing blockchain activity and capital outflows from the crypto market suggest potential further challenges for the digital asset.
