Bitcoin (BTC) has entered its historically favorable fourth-quarter period, but the potential for a strong rally remains uncertain due to weak demand growth, according to an Oct. 2 CryptoQuant report.

The report noted that while Bitcoin typically performs well during the fourth quarter in halving years, the lack of significant demand recovery may hinder its ability to reach projected price targets of $85,000 to $100,000.

Since July, Bitcoin’s demand has stagnated, fluctuating between -23,000 and +69,000 Bitcoin monthly. This stands in stark contrast to the surge in April when demand increased by 496,000 Bitcoin, propelling prices to nearly $70,000.

The current flat demand poses a risk for Bitcoin’s fourth-quarter performance, despite its historically positive seasonality during halving years like 2016 and 2020, when prices rose by 59% and 171%, respectively.

Mixed signals

The recent activity in US-based spot exchange-traded funds (ETFs) offers some hope for renewed demand despite providing mixed signals over the last few months.

On Sept. 26, spot ETFs net purchased 7,000 Bitcoin, reversing their earlier net selling of 5,000 Bitcoin on Sept. 2. This marked the largest daily purchase since July, though it remains below the first-quarter average, when ETFs bought 9,000 Bitcoin daily, driving prices higher.

If ETF demand continues to increase, it could provide a much-needed boost to Bitcoin prices in the coming months. However, current levels suggest that demand still has room for improvement.

Meanwhile, CryptoQuant’s “Total Supply by Age” data indicates that Bitcoin’s short-term supply has followed patterns similar to those seen in previous halving cycles. In both 2016 and 2020, short-term supply decreased as demand paused after the halving but spiked again later in the cycle as new buyers acquired Bitcoin from long-term holders.

The report suggested that if demand picks up, short-term supply could increase sharply in the fourth quarter, further supporting a price rally.

Demand recovery is crucial

While Bitcoin’s bull-bear cycle indicator shows the flagship crypto entering the first quarter in a bull phase, the momentum is weaker compared to previous halving years.

In 2020, Bitcoin was in a clear bull phase that resulted in a 171% price gain by year-end. This year, however, Bitcoin has been hovering between bull and bear phases since August, signaling less certainty in market direction.

On-chain valuation metrics point to price resistance between $85,000 and $100,000, levels where short-term traders typically take profits after a rally. These price bands acted as resistance earlier this year when Bitcoin reached its all-time high of $73,600 in March.

According to CryptoQuant, Bitcoin could push toward these levels if demand resumes, but without a significant uptick in buying pressure, the rally may fall short of these ambitious targets.

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