Bitcoin Faces Potential Drop to $86K as Market Weakens, But Bottom May Be Near

Bitcoin (BTC) recovered from a dip to $93,000, but downside risks remain, with analysts at CryptoQuant warning that weakening demand, declining network activity, and fading liquidity inflows could push BTC down to $86,000.

Demand for Bitcoin Declining After Late 2024 Surge

Bitcoin saw a surge in demand in late 2024, fueled by optimism surrounding Donald Trump’s election victory and expectations of regulatory easing. However, CryptoQuant data now shows a sharp reversal, with BTC demand dropping from a peak of 279,000 BTC on December 4 to just 70,000 BTC recently.

A key sign of weakening demand is the slowdown in spot Bitcoin ETF inflows. After seeing daily purchases of up to 18,000 BTC in November and December, these funds are now experiencing consistent outflows over the past two weeks.

In addition, CryptoQuant’s Inter-exchange Flow Pulse, which tracks BTC transfers between exchanges, indicates a decline in U.S. investor demand, as BTC flows to Coinbase have dropped below their 90-day moving average.

Stablecoin Growth and Network Activity Show Weakness

Stablecoins—often used as liquidity for crypto investments—have also lost momentum. While the total stablecoin market cap recently hit $200 billion, its growth rate has slowed significantly. The 60-day average expansion of USDT’s market cap has plunged over 90% since mid-December, falling from $20 billion to just $1.5 billion.

On-chain activity is another red flag. Bitcoin’s network activity has hit a one-year low, according to CryptoQuant’s Bitcoin Network Activity Index. The index is now down 17% from its November 2024 peak and has dropped below its 365-day moving average for the first time since China’s mining ban in 2021. This decline suggests lower investor engagement and reduced speculative trading.

Bitcoin Nearing a Bottom?

After reaching an all-time high of $109,000 in January, Bitcoin has struggled to stay above $90,000. Broader crypto market sentiment has been affected by highly speculative memecoin launches, such as TRUMP and LIBRA, which have absorbed significant capital.

Well-known trader Bob Loukas believes Bitcoin’s correction may be nearing its final phase.

“The key question now is whether BTC can hold the $90,000 support level,” Loukas wrote in an X post. “But either way, the market is resetting sentiment, which is a necessary process.”

While Bitcoin could dip below $90,000, analysts suggest that a bottom may form soon, potentially setting the stage for the next major move.