While altcoins have been making significant moves in the current market, Bitcoin (BTC) has struggled to maintain a convincing surge past the $70,000 level. On-chain indicators suggest that trading interest in Bitcoin has declined considerably, hinting at a potential price drop ahead.

Bitcoin's weekly transaction volume has dropped to under $14 billion, a level last seen in 2023 when the BTC price was trading below $30,000. This decline in transaction volume signals a significant shift in market dynamics, with both Bitcoin spot trading and on-chain transaction volume plummeting. The interest is now primarily focused on ETFs and derivatives, indicating a growing preference for speculative demand through these financial instruments.

The chart highlights a notable decline in interest in Bitcoin trading and on-chain transaction volumes, with the latter being particularly low. The network recorded only 722,000 BTC moved in seven days, a stark contrast to the 1.79 million BTC moved in October 2023, despite similar trading volumes and half the price. The crypto market volumes have dropped to $50 billion, with funding rates only marginally positive, suggesting low interest, as reported by 10x Research.

Federal Reserve policy and inflation data are viewed as the critical factors that could propel Bitcoin to new all-time highs. On June 5, the Bank of Canada might initiate a global rate-cutting cycle, potentially setting a precedent for the Fed. Additionally, for Bitcoin to rally, the US inflation report on June 12 would need to show a lower figure, around 3.3%.

Despite the lull in spot trading activity, the Bitcoin derivatives market shows strength along with a strong interest in Bitcoin ETFs. The approved Bitcoin spot ETFs have seen robust demand since their inception in January 2024, generating a total trading volume of $12 billion over the past seven trading days, comparable to Bitcoin's spot volume on crypto exchanges.

A significant drop in Bitcoin exchange balances suggests that whales are moving their coins off exchanges in anticipation of higher prices. Over the past month, 88,000 Bitcoins have been withdrawn, leaving only 2.5 million coins on exchanges, the lowest level since March 2018. This trend of exchange outflows began on May 15, aligning with the 45-day period following the quarter-end 13F filing requirement for U.S. registered investors managing over $100 million.