The Bitcoin rally that took the premier cryptocurrency to a new all-time high of $109,000 in January 2025 is showing signs of fatigue. Several key metrics indicate that BTC is at risk of a deeper pullback, with some analysts warning that the price could drop as low as $86,000 before finding a bottom.
Demand Retreats as Network Activity Declines
The surge in Bitcoin demand that helped propel prices higher in late 2024 is now retreating. Data from crypto analytics firm CryptoQuant shows that demand growth has slumped to just 70,000 BTC recently, down sharply from the 279,000 BTC peak reached on December 4.
Inflows into Bitcoin exchange-traded funds (ETFs), which were a major driver during the rally as U.S. investors piled in, have dried up. BTC ETFs are now seeing consistent net outflows over the past two weeks, a stark contrast to the strong inflows of up to 18,000 BTC per day seen in November and December.
On-chain data also points to waning interest in Bitcoin. CryptoQuant’s Inter-exchange Flow Pulse, which tracks BTC transfers between crypto exchanges, shows that flows to Coinbase, considered a proxy for U.S. spot demand, have fallen below the 90-day moving average.
Stablecoin Growth Stalls, Liquidity Tightens
The expansion of the stablecoin supply, which often acts as dry powder for the crypto markets, is losing steam. Although the total stablecoin market cap recently hit a new record above $200 billion, the growth rate has slowed significantly.
The 60-day average change in the market cap of Tether (USDT), the largest stablecoin, has plunged by over 90% since mid-December. It currently stands at just $1.5 billion, down from over $20 billion previously. Since stablecoins are frequently used to buy other cryptocurrencies, the slowdown suggests a lack of fresh capital entering the market.
Bitcoin Network Activity Hits One-Year Low
Activity on the Bitcoin blockchain network has fallen to the lowest level in a year based on CryptoQuant’s Bitcoin Network Activity Index. The metric has declined 17% from the November 2024 peak and recently dropped below its 365-day moving average for the first time since China’s mining ban in July 2021.
Fewer transactions being processed on the network is seen as a sign of declining engagement by investors and indicates that speculative interest in Bitcoin is starting to wane. This trend aligns with the broader downturn in demand and liquidity.
Bitcoin’s Cycle Low May Be Near
Despite the bearish signals, some analysts believe that Bitcoin is nearing a bottom. Well-known trader Bob Loukas noted that BTC is in the “final stretch of its weekly cycle” and that the sentiment reset is nearly complete.
“More a question of if the bottom of the range (90k) can hold or not. Doesn’t matter, sentiment resetting occurs either way.”
– Bob Loukas
However, Loukas cautioned that Bitcoin could break below the $90,000 range low before ultimately finding a bottom. With key support at that level being tested, how BTC reacts here could determine whether the correction extends further or if the next leg up can begin.
The Bitcoin market remains at a crossroads as bulls and bears battle it out around the $90,000 support zone. While the path of least resistance appears to be lower in the near-term, a sentiment reset after such a strong rally is healthy and could lay the foundation for the next move higher. However, a break below $90,000 may see BTC fall to $86,000 or lower before the correction is complete.
Key Takeaways
- Bitcoin is facing downside risks as several key metrics deteriorate
- Demand growth and network activity are declining
- Stablecoin expansion is slowing and liquidity conditions are tightening
- BTC could drop to $86,000 if $90,000 support breaks
- Market is at a crossroads as sentiment reset nears completion
