Bitcoin is currently navigating a complex market landscape.
Despite recent gains and a series of optimistic projections, retail investors’ interest in bitcoin has plummeted to a three-year low, raising concerns among analysts and market participants about the sustainability of the current bitcoin bull run.
Bitcoin’s price has experienced significant volatility over the past year, reaching an all-time high of $73,000 in March 2024.
However, this impressive rally has not been accompanied by a corresponding surge in retail investor demand. According to data from CryptoQuant, the demand from retail investors has hit its lowest point in three years.
Ki Young Ju, the founder of CryptoQuant, highlighted this troubling trend in a recent post. He pointed out that the 30-day change in bitcoin’s transfer volume for transactions under $10,000—a metric used to gauge retail interest—has dropped significantly.
Ju stated that this metric has fallen below negative 15% over the past 30 days, indicating a substantial decline in retail participation. He added:
“Bitcoin retail investor demand is at a 3-year low. It’s measured by the 30-day change in total transfer volume for transactions under $10K.”
Retail investors have historically played a crucial role in driving bitcoin’s major price rallies. Their enthusiasm and buying volume can significantly boost market sentiment and propel prices higher.
Minkyu Woo, a contributor to CryptoQuant, emphasized this point and added:
“The real bull run typically begins with massive buying volume driven by retail investors. We have not yet seen this volume from retail investors.”
Despite the current low levels of retail interest, some market participants believe that a rebound is possible.
CoinTraderNik, a market analyst, suggested that global liquidity expansion in the latter half of 2024 could reignite retail interest. He stated, “The second half will be driven by global liquidity expansion. ‘Mass retail’ arrives when $BTC breaks $100k.”
Recent data indicated a “more than 20% probability” that BTC will reach $100K by the end of 2024. Quinn Thompson from the hedge fund Lekker Capital predicted that the price of bitcoin could reach $100,000 by November 2024.
While retail investors are on the sidelines, institutional interest in Bitcoin remains robust. Large investors, often referred to as “whales,” have been accumulating bitcoin at a rapid pace.
Data from IntoTheBlock shows that the number of addresses holding at least 1,000 BTC has reached a two-year high. This trend indicates that institutional investors are confident in bitcoin’s long-term prospects.
Moreover, spot Bitcoin exchange-traded funds (ETFs) in the United States have seen significant inflows.
VanEck CEO Jan van Eck noted in April that around 90% of the inflows into spot Bitcoin ETFs were from retail investors. However, these inflows have fluctuated, with a notable 87% drop on July 17, recording a total of $53.3 million across 11 tracked products.
Bitcoin’s price has been hovering around crucial support levels, struggling to break through key resistance points. As of the latest data, bitcoin is trading around $67,000, reflecting an 13% increase over the past week.
Despite these gains, the broader market sentiment remains cautious. The Fear and Greed Index, which measures market sentiment, indicates a “Greed” zone with a score of 60 out of 100. This is a significant rebound from the “Extreme Fear” zone observed in January 2023.
Another indicator of declining retail interest is Google search trends. Searches for the term “Bitcoin” have dropped 44% over the past three months since the Bitcoin halving event, and are down almost 57% since bitcoin reached its all-time high in March.
This decline in search interest often correlates with reduced retail participation in the market.
On-chain data further supports this trend. The number of unique active addresses on the Bitcoin network has been stagnant or declining over the past two years. This decline suggests that fewer individual investors are actively transacting on the network.
Bitcoin’s hash rate, a measure of the network’s overall computing power, has also seen fluctuations. At the beginning of July, the hash rate dropped to levels not seen since December 2022.
This decline is attributed to several factors, including the recent Bitcoin halving event, which reduced the reward miners receive per block.
Despite this, the network’s security remains strong. Historical data suggests that bitcoin’s price and hash rate are somewhat correlated, with the price often leading the hash rate.
Experts have dismissed fears of a “miner death spiral,” noting that Bitcoin’s built-in difficulty adjustment mechanism helps maintain network stability.
Political developments in the United States are also influencing bitcoin’s market dynamics. Former President Donald Trump, who has changed his stance on digital assets, is now seen as a potential catalyst for Bitcoin’s future growth.
Trump has accepted bitcoin donations and has proposed making the United States a hub for Bitcoin mining. If he wins the upcoming presidential elections, some believe that bitcoin could gain strategic importance, potentially driving global adoption.
Economic factors, such as interest rate policies, are also playing a role. Following a disinflationary trend, many traders expect the Federal Reserve to cut interest rates in September.
Such a move could fuel risk assets, including bitcoin. Some central banks have already initiated rate cuts, setting the stage for a potential global liquidity injection.
Despite the current market pessimism, BlackRock’s Bitcoin ETF has continued to attract significant inflows.
The iShares Bitcoin Trust (IBIT) received another $116 million in inflows on July 19, marking the tenth consecutive day of positive inflows. In over eight of these ten days, the ETF saw daily inflows of more than $100 million, a rare achievement in the industry.
However, positive commentary on Bitcoin has sharply declined. Traders are increasingly shorting the asset, and positive mentions on social media have dropped to about a third of what they were four months ago.
Santiment, a blockchain market intelligence firm, measures social sentiment across platforms like Reddit, X, 4chan, and BitcoinTalk. Interestingly, there was a surge in “buy the dip” mentions when bitcoin fell towards its near-five-month low of $53,600 on July 5.
The future of bitcoin’s bull run remains uncertain. While institutional interest and ETF inflows are positive signs, the lack of retail participation could limit the extent of the rally. Analysts are closely watching for signs of renewed retail interest, which could signal the beginning of a “real bull run.”
James Van Straten, an analyst, noted that retail investors have been buying during price dips and selling around tops, behaving like “smart money.”
This pattern was particularly evident during the bear market lows following the collapse of the FTX exchange. Van Straten’s observations suggest that retail investors are still engaged, albeit in a more strategic manner.
Bitcoin’s market dynamics are currently shaped by a mix of institutional confidence and retail apathy.
While whales and institutional investors continue to accumulate bitcoin, retail demand is at a historic low. The interplay between these forces will determine the trajectory of bitcoin’s price in the coming months.
