Bitcoin Weekly Forecast: BTC demand and liquidity conditions remain weak

• Bitcoin price has been consolidating between $94,000 and $100,000 since early February.
• US Bitcoin spot ETF data recorded a total net outflow of $489.60 million until Thursday.
• CryptoQuant’s report suggests that if demand growth and liquidity conditions do not improve, Bitcoin price could decline to $86,000.

Bitcoin (BTC) price has been consolidating between $94,000 and $100,000 since early February, hovering around $98,000 at the time of writing on Friday. Despite this consolidation, US Bitcoin spot Exchange Traded Funds (ETFs) data recorded a total net outflow of $489.60 million until Thursday, hinting signs of weakness among institutional investors. Moreover, a CryptoQuant’s report suggests that if demand growth and liquidity conditions do not improve, the price of Bitcoin could decline to $86,000.

Bitcoin institutional demand continues to weaken 

Bitcoin’s price consolidates between $94,000 and $100,000 while its institutional demand weakens this week. According to Coinglass, Bitcoin spot ETF data recorded outflows totaling $489.6 million until Thursday, after $580.2 million the previous week. If the magnitude of the outflow continues and intensifies, the Bitcoin price could see further corrections.

Total Bitcoin Spot ETF Net Inflow chart. Source: Coinglass

Additionally, the CryptoQuant report this week explains that the demand for Bitcoin remains low. The chart below shows that Bitcoin’s apparent demand growth has declined after accelerating in November-December 2024, spurred by the US Presidential election results. It has declined to 70K this week from 279K on December 4.

Bitcoin Apparent Demand (30-day sum) chart. Source: CryptoQuant

FTX repayments dip in Bitcoin price

Bitcoin price dipped on Tuesday, reaching a low of $93,388 but recovering to close above $95,600. This price knee-jerk move was mostly fueled by the news that defunct crypto exchange FTX has begun repaying funds to customers with account balances of $50,000 or less. FTX also announced that repayments to customers over $50,000 will start on May 30.

According to Arkham data, the bankrupt exchange started repaying its creditors on Tuesday. Users with FTX claims of under $50,000 have started receiving funds through distribution providers Kraken and Bitgo. This wave of creditors represents approximately $1.2 billion in value. However, the payouts are expected to total up to $16.5 billion.

Bitcoin volatility hits history low 

This week’s K33 Research ‘Ahead of the Curve’ report highlights volumes, yields, options premiums, and ETF flows have moved to areas not seen since before the US Presidential election in November, with volatility at multi-month lows.

BTC/USD volatility chart. Source: K33 Research

The report further explains that as of February 13, 37% of the top 100 US companies exhibited greater 30-day volatility than BTC, a level not seen since October 2023. As evidenced in the graph below, such volatility regimes rarely last long, and traders should be ready for a sudden regime change. 

An overall risk-averse sentiment suggests traders are prepared for downside volatility, while moderate leverage levels currently point toward less overhanging risks of liquidation cascades.

(Left) 30-day volatility: BTC vs top 100 US companies chart. (Right) % of top US companies with 30-day volatility higher than the BTC chart.  Source: K33 Research report

Moreover, the CryptoQuant report explains that Bitcoin network activity continues to decline, reaching the lowest level in a year and entering a negative trend. CryptoQuant’s Bitcoin Network Activity Index indicates that activity has decreased by 17% since the November record high. The index is now at 3,658, the lowest level since February 2024. Moreover, the index has fallen significantly below its 365-day moving average, which had not occurred since July 2021 after China banned Bitcoin mining. This indicates network activity has entered a negative (pink area) trend, as shown in the graph below.

Bitcoin Network Activity chart. Source: CryptoQuant

The report concluded that if demand growth and liquidity conditions do not improve, the price of Bitcoin could decline to $86,000. This level represents the Trader’s On-chain Realized Price minimum band (dotted light blue line), which supports price corrections in a bull market. This level acted as support in July-September 2024 and October 2023.

Bitcoin Trader on-chain realized price bands chart. Source: CryptoQuant

Is Bitcoin consolidation ending soon?

Bitcoin price has been consolidating between $94,000 and $100,000 for more than two weeks. On Tuesday, BTC declined and found support around the lower boundary of the consolidating range and rose 2.75% until Thursday. At the time of writing on Friday, it hovers around $98,000.

If BTC recovers and breaks above the upper boundary of the consolidating range of $100,000, it would extend the recovery to retest its January 30 high of $106,457.

The Moving Average Convergence Divergence (MACD) indicator showed a bullish crossover on the daily chart on Thursday, giving a buy signal and indicating an upward trend ahead.

However, the Relative Strength Index (RSI) on the daily chart hovers around its neural level of 50, indicating a lack of momentum and indecisiveness among investors. For the bullish momentum to start, the RSI must accelerate above its neutral level of 50.

BTC/USDT daily chart

Conversely, if BTC breaks and closes below the lower boundary of the consolidating range of $94,000, it could extend the decline to test its psychologically important level of $90,000.

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