Why is Bitcoin not increasing in line with transaction demand?
Last week, the number of daily transactions on the Bitcoin network reached an all-time high of 682,000 per day, but the price didn't rise with the increased load.
Ordinals caused the heightened demand. We've already covered this new way of transmitting digital objects. Since sending ordinals is usually done via small amounts of BTC, the network's cash turnover has remained low. Two years ago, indicators reached $13 billion, but now they don't exceed $4.5 billion.
The significant gap between the number of transactions and transfer volume hints at a lack of external interest in ordinals. This is also confirmed by a drop in the inflow of funds to crypto exchanges from the record-high of $4.2 billion two years ago to the current $0.6 billion. Simply put, users aren't rushing to buy Bitcoin and then carry out ordinal transactions.
Institutional investors (a key investment power since 2020) have now reduced their market presence for the fifth week in a row. During this time, they've withdrawn $150 million from Bitcoin funds.
But the majority of holders aim to keep Bitcoin in the hope that its price will continue to rise.
Long-term holders, i.e., those whose coins have been idle for over 155 days, have set a new accumulation volume record with 14.5 million BTC, and the MVRV ratio indicates that the cryptocurrency is oversold, as it has been in previous bearish cycles.
Financial markets are currently experiencing uncertainty due to a possible reversal of the Fed's monetary policy stance. CME's FedWatch tool predicts that there is an 80% chance that the interest rate will remain unchanged at the Fed's upcoming meeting in June. If the regulator pauses its interest rate hikes, it may give Bitcoin momentum, with some players, including institutional investors, turning their eyes once again to the cryptocurrency.
StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)