Demand for bitcoin has remained subdued since tensions in the Middle East escalated on Tuesday, according to an analyst.
CryptoQuant data shows that the Net Taker Volume metric has significantly decreased since an escalation of tensions in the Middle East, when Iran fired more than 180 ballistic missiles at Israel on Tuesday in response to Israeli attacks on Hezbollah positions in southern Lebanon.
"Buying pressure has remained subdued since the Iran strike," CryptoQuant analyst J.A. Maartunn told The Block. "The drop in net taker volume by over $150 million signals significant selling pressure, while the fact that it hasn’t exceeded $100 million since Tuesday suggests a lack of strong buying momentum."
Bitwise Head of Research - Europe André Dragosch, noted a negative trend in net buying volumes on bitcoin spot exchanges over the past three days. However, he pointed out signs of short-term seller exhaustion, citing an increase in long bitcoin futures liquidations—the highest since Aug. 5, when bitcoin hit its recent low.
"Moreover, short-term holders have sent the most bitcoins at a loss to exchanges since the lows in August," Dragosch explained. He added that sentiment has shifted from relatively high to more neutral levels, according to the Bitwise Cryptoasset Sentiment Index.
Dragosch said he has observed Glassnode data that reveals the illiquid supply of bitcoin has recently reached an all-time high, while the supply categorized as highly liquid and liquid has dropped to a year-to-date low, indicating a shift in market dynamics.
Bitwise Research Analyst-Europe Ayush Tripathi also pointed to an increase in the supply of bitcoin held by long-term holders—investors who have held their bitcoin for at least 155 days—despite the recent decline in prices. The increase in the supply of bitcoin held by long-term holders since the beginning of October suggests that while short-term demand has weakened, there is still confidence in bitcoin as a long-term investment.
Despite this sluggish demand, QCP Capital analysts believe the downturn is temporary. They highlighted the strong correlation between the performance of cryptocurrencies and U.S. stocks, predicting that as equities recover, crypto markets will follow suit.
"Macroeconomic factors, particularly in the U.S., are currently driving the price of risk assets," they said. The analysts pointed to the latest U.S. ADP National Employment report, which showed stronger-than-expected job growth in September, as a sign of labor market strength that could encourage the Federal Reserve toward a more dovish stance on interest rates.
"The ADP payroll report beat expectations, and tomorrow's non-farm payroll report will be key in confirming a strong U.S. labor market. A combination of expected rate cuts and labor strength could boost risk assets," QCP Capital analysts said.
In cryptocurrency market trading on Thursday, investors remained cautious as they awaited a potential Israeli response to Iran’s missile strikes. Bitcoin has held just above the $60,000 mark, while Ethereum dropped below $2,400. Bitcoin’s price fell by 2.8% in the past 24 hours and was sitting at around $60,286 at 12:30 p.m. ET, according to The Block’s Bitcoin Price Page.
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