Bitcoin (BTC) has witnessed a significant surge in price, crossing the $60,000 mark and reaching the $67,000 zone, fueled by news of lower-than-expected inflation rates in the United States. The latest rally in BTC has been sustained by a notable decline in selling pressure, as highlighted in the recent CryptoQuant weekly report. While demand for the cryptocurrency is yet to fully materialize, signs of a bottoming market and potential upside movement are emerging.

Decline in Selling Pressure

The reduction in BTC selling pressure is evident in both on-chain activity of short-term holders and the balances on over-the-counter (OTC) desks. Balances on OTC desks have stabilized since late April, indicating a decrease in bitcoin supply from market participants. Similarly, short-term BTC holders are experiencing low or negative profit margins, depleting profits accumulated in 2024 and leading to unrealized losses on positions. Historically, such conditions have coincided with local price bottoms.

Miners' Profitability and Market Bottoming

Analysts from CryptoQuant note that Bitcoin miners are currently facing extremely low profitability, comparable to levels seen post-March 2020 COVID market crash. Historically, such low miner profitability has correlated with price bottoms, suggesting a potential stabilization in the market.

Challenges in Demand Growth

While Bitcoin demand growth appears to be stabilizing after a period of deceleration, sustaining the price rally requires a significant uptick in demand. The rise in BTC balances of permanent holders and large investors indicates increased demand from these segments. However, further demand is needed, potentially from the spot Bitcoin exchange-traded fund (ETF) market and other investment funds.

Spot Bitcoin ETF Purchases and Stablecoin Liquidity

To refresh demand growth, the market requires a new wave of spot Bitcoin ETF purchases, according to CryptoQuant analysts. There are early signs of increased demand for these products, with total inflows surpassing $560 million in the last two trading days. Additionally, surging stablecoin liquidity growth suggests potential upward movement for BTC.

Conclusion

As BTC continues its upward trajectory, the decline in selling pressure and signs of bottoming market conditions provide optimism for investors. However, sustaining the price rally hinges on substantial demand growth, particularly from institutional investors and ETF markets. With miners facing historically low profitability and stablecoin liquidity on the rise, the crypto market remains poised for further developments in the coming weeks.