Bitcoin (BTC) has now entered its historically favorable fourth quarter, but uncertainty looms over its potential for a significant rally due to a lack of demand growth, as highlighted in a recent report from CryptoQuant.
Bitcoin’s Fourth Quarter: A Closer Look
The report emphasizes that although Bitcoin has typically performed well in the fourth quarter of halving years, a significant recovery in demand is crucial to attain forecasted price levels between $85,000 and $100,000.
Since July, Bitcoin’s demand has been relatively stagnant, oscillating between -23,000 and +69,000 BTC each month. This contrasts sharply with the April surge, where demand skyrocketed by 496,000 BTC, pushing prices near $70,000.
This stagnation in demand raises concerns regarding Bitcoin’s performance in the fourth quarter, despite the historical positive trends seen in the past halving years of 2016 and 2020, where prices gained 59% and 171%, respectively.
Mixed Market Signals
Recent activities in US-based spot exchange-traded funds (ETFs) show some potential for renewed demand; however, they have also sent mixed signals over recent months.
- On September 26, spot ETFs net acquired 7,000 BTC, reversing the previous net sale of 5,000 BTC recorded on September 2.
- This marked the largest daily purchase since July, though it remains below the first-quarter average, where ETFs purchased 9,000 BTC daily.
If the trend of increasing ETF demand continues, it could significantly bolster Bitcoin’s price in the upcoming months. However, current patterns indicate that demand must further improve.
Short-Term Supply Trends
According to CryptoQuant’s “Total Supply by Age” analysis, Bitcoin’s short-term supply is mirroring patterns observed in previous halving cycles. In the halving years of 2016 and 2020, a decrease in short-term supply followed by a surge in demand was noted.
This trend suggests that if demand picks up in the fourth quarter, a sharp increase in short-term supply could occur, potentially facilitating a rally in prices.
The Importance of Demand Recovery
Despite Bitcoin signaling a transition into a bullish phase, its momentum appears weaker compared to past halving years. The 2020 bull phase saw a remarkable 171% price increase by year’s end.
Currently, Bitcoin has been fluctuating between bullish and bearish phases since August, indicating a lack of clear market direction.
On-chain valuation metrics reveal price resistance around $85,000 to $100,000—levels at which short-term traders often take profits post-rally. Earlier this year, these levels acted as resistance when Bitcoin peaked at $73,600 in March.
According to CryptoQuant, attaining these price levels is possible if demand resurfaces; however, without a notable increase in buying pressure, reaching these lofty targets may remain a challenge.