Bitcoin Rally Falters at 200-Day Average Amid Weakening Demand

Bitcoin's recent rally from its February lows has hit a roadblock at the 200-day simple moving average, resulting in a decline in prices. This trend is similar to what was observed in 2022, when a 43% relief rally failed to break through the same indicator before bitcoin resumed its decline.

The analytics firm CryptoQuant attributes this setback to weakening demand, citing declining leveraged futures buying, spot demand, and U.S. ETF inflows. The firm's Bull Score Index has fallen from 40 to 20, a level that the firm considers 'extremely bearish' and matches the February-March period when bitcoin traded between $60,000 and $66,000.

The Coinbase bitcoin premium, which measures whether bitcoin is trading higher on Coinbase than on offshore venues, remains negative. This suggests that U.S. investors are not paying up for exposure to bitcoin, a sign of weakening demand. Additionally, U.S. spot bitcoin ETFs have flipped into sellers, with weekly data showing the products lost about $979.7 million in the week ended May 19.

While there is still some demand for bitcoin in certain regions, such as Korea's kimchi premium, which has dropped below zero, indicating no above-normal demand on exchanges in the country. The correction could deepen if support levels are broken, with $70,000 identified by CryptoQuant as the next major on-chain support.