Bitcoin's price surpassed $77,000 amid falling oil prices, while demand for the cryptocurrency shows signs of weakness.
On May 25, Bitcoin's price climbed above $77,000, marking a 0.5% daily increase and closing above the significant 50-day moving average at $76,940.
This upward trend in the cryptocurrency market coincided with a notable drop in commodity prices, particularly WTI crude oil, which fell over 5% to $91 per barrel. This decline boosted Asian stock markets, with Japan's Nikkei 225 rising nearly 3% and India's Nifty 50 increasing by more than 1%.
The positive market sentiment is attributed to advancing negotiations between the U.S. and Iran, with reports suggesting that a deal to restore shipping through the Strait of Hormuz could be finalized on May 25, according to U.S. Secretary of State Marco Rubio.
While Bitcoin experienced significant gains, altcoins like XRP and Solana saw modest increases of 0.6% and 0.4%, respectively, although these assets remain below their 50-day moving averages.
Investors are cautious, however, as there have been substantial outflows from Bitcoin ETFs, with more than $2 billion withdrawn in the past fortnight. Experts from BRN indicate that for Bitcoin's rally to persist, a slowdown in selling pressure and stable liquidity in stablecoins is essential.
Declining Demand for Bitcoin
Analyst Darkfost highlighted that visible demand for Bitcoin has reached its lowest point since early 2023, with the metric dropping to -147,000 BTC, a level not seen since December 2023. This demand is calculated by comparing new coin issuance against long-term inactive supply.
“Even if this situation appears relatively bearish in the short term, these types of environments have historically also created interesting opportunities for long-term investors,” Darkfost stated.
He warned that without a revival in the spot market, Bitcoin's price growth could struggle to continue, relying primarily on futures trading.
“Derivatives amplify price movements, but for a sustainable bullish trend, real demand for the asset is needed,” he added.
Market Analysis and Signals
Joao Vedson, founder of the Alphractal platform, observed contrasting performance metrics between Bitcoin and Ethereum, noting that Bitcoin’s annualized Sharpe ratio has turned negative, suggesting that its returns do not justify the risks currently. In contrast, Ethereum's Sharpe ratio is neutral, near zero.
Vedson pointed out that negative Sharpe ratios often indicate strong selling pressure and can signal a market bottom, although he emphasized that a reversal may not be immediate.
Another analyst, maartunn, reported that Coinbase is experiencing its highest selling pressure since February, indicating a challenging environment for Bitcoin.
“Coinbase is seeing its STRONGEST SELLING PRESSURE since February,” he noted.
Potential Reversal Signals for Bitcoin
On-chain analyst MorenoDV reported a decline in Bitcoin's fund flow ratio on Binance, which has fallen to between 0.010 and 0.012. This indicator reflects the trading volume on exchanges compared to total transaction activity on the Bitcoin network.
Historically, such low readings have preceded significant trend changes, suggesting that reduced trading activity may indicate a potential price bottom. MorenoDV remarked that this could signal either continued weakness in demand or a potential foundation for a recovery.
Ethereum's Future Prospects
Trader Michaël van de Poppe suggested that current Ethereum prices present a good opportunity for long-term accumulation. He noted that despite recent underperformance, Ethereum remains a critical component of the on-chain ecosystem.
“This is the area to accumulate #Ethereum,” he stated.
Van de Poppe linked Ethereum's price decline to macroeconomic factors, particularly the inverse relationship between decentralized finance and government bond yields. He anticipates a reversal of this trend in the future, with Ethereum's price approaching a strong support level.
