Bitcoin Demand in Contraction After Trump’s Crypto Reserve Announcement: CryptoQuant

This week, the crypto market, led by bitcoin (BTC), received positive news and reacted accordingly. However, the reaction was short-lived, and the entire field has returned to stagnation and negative trajectories.

A weekly report from the market analytics platform CryptoQuant revealed that real spot demand for BTC is still in contraction territory, while bitcoin’s apparent demand has continued to decline following the acceleration period seen in November-December 2024.

“Trump-n-Dump”

Earlier this week, the market witnessed what CryptoQuant tagged a “Trump-n-Dump.” This refers to traders massively selling their digital assets after a rally triggered by an announcement concerning a United States Strategic Crypto Reserve.

On March 2, President Trump revealed that he had directed the Presidential Working Group to move forward with the creation of a strategic digital asset reserve. He said the reserve would include BTC, ether (ETH), Solana (SOL), Ripple (XRP), and Cardano (ADA), reinforcing his promise to make the United States the crypto capital of the world.

After the announcement, the prices of the crypto assets chosen for the reserve spiked. BTC surged by 14%, ETH by 20%, XRP by 40%, SOL by more than 20%, and ADA by at least 60%.

By Monday morning, crypto prices had returned to their pre-announcement levels, clearing all the gains recorded during the rally. While prices fell, traders rushed to offload their assets on exchanges. The number of BTC flowing into trading platforms per hour spiked from 500-1,000 to 6,739 on March 3, while ETH inflows rose to roughly 300,000.

On the other hand, about 2 billion XRP flowed into crypto trading platforms on Sunday and Monday, with the coin’s hourly inflows hitting 193 million. CryptoQuant found that most of these flows came from whales executing transactions of 1 million+ XRP.

Crypto Assets Record Deeper Corrections

According to CryptoQuant, the high inflows into crypto trading platforms indicated that traders were selling their assets to take advantage of the sudden price spike. Currently, the prices of BTC, ETH, SOL, XRP, and ADA are all down by at least 3% daily, per data from CoinMarketCap.

Interestingly, these cryptocurrencies recorded deeper corrections on March 6 after Trump signed an executive order establishing a Strategic Bitcoin Reserve and a Digital Asset Stockpile. The order established reserves that will consist of cryptocurrencies forfeited in criminal or civil proceedings. The U.S. government will neither sell its cryptocurrencies nor acquire any additional assets beyond those obtained through forfeiture proceedings.

Nevertheless, CryptoQuant insists that BTC needs higher demand to experience a sustained rally in its price, notwithstanding economic decisions made by the U.S. government.