Bitcoin Retail Demand Rebounds From April Low, but Overheating Has Yet to Emerge

On-chain data show demand from Bitcoin retail investors has been recovering since hitting a low last month. Even so, the market has yet to enter a full-fledged retail overheating phase.

On May 12, on-chain analyst Axel Adler Jr. wrote in a newsletter that Bitcoin’s retail demand indicator had rebounded to positive 4.38% from negative 8.2% in early April.

The indicator is calculated based on the rate of change in the 30-day moving average of Bitcoin transaction volume in the $0 to $10,000 range. It is used to gauge whether the pace of retail capital inflows is accelerating or slowing.

The analysis showed the indicator fell to negative 8.2% on April 5, signaling weakness. It then extended its recovery and entered positive territory for the first time on April 27, at positive 0.24%. It rose to positive 6.31% on May 6 and is now holding around positive 4.38%.

The market is placing significance on signs that the pace of retail money flowing into Bitcoin is starting to improve again.

Still, the recovery in actual transaction volume remains limited. Based on the 30-day moving average, Bitcoin network transfer volume in the $0 to $10,000 band fell to about $336 million in mid-April before recovering to roughly $351 million.

That remains below the roughly $365 million to $375 million recorded in February and March of this year.

Adler wrote that the current trend suggests retail demand has moved out of contraction and re-entered an expansion phase. Still, he said it is difficult to view the market as being in a large-scale retail overheating or euphoric phase.

He added that in the early stages of a recovery, demand momentum usually improves first and actual transaction volume increases later. If the indicator does not turn negative again, the current recovery trend could be sustained.