Bitcoin’s surge from around $64,000 to over $66,000 in just two days has sparked debate about whether a new bull trend has begun in the cryptocurrency market. The on-chain analytics platform CryptoQuant, however, reported that the recent move was supported more by leveraged trading than strong spot demand.
According to CryptoQuant’s analysis, the brief negative turn in funding rates on July 18-19 caused a squeeze for investors who had taken short positions in Bitcoin. The rally that began with the closing of short positions continued with the entry of new leveraged trades into the market.
Along with the rise in Bitcoin’s price, the size of open positions in the futures markets also reached a new peak, increasing from approximately $21.2 billion to $23 billion. CryptoQuant stated that this increase indicates that the rise was not solely due to the liquidation of short positions, but also to the addition of new leveraged positions to the market.
However, it was noted that funding rates have not yet reached excessive levels. Therefore, it was stated that there is no significant overheating in the futures market at this stage, but price movement is largely based on derivatives markets.
According to CryptoQuant data, Bitcoin’s spot trading volume has remained in a “cooling” zone since April. Despite the recent surge, there hasn’t been a strong increase in spot market trading volume.
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The company noted that futures trading volume also remained at a “neutral” level, arguing that the current price movement was an increase in volatility driven by investors in derivative markets rather than actual capital inflows.
It was noted that net stablecoin flows on exchanges were negative, but there was no significant decline in the total stablecoin market capitalization. According to CryptoQuant, this indicates that capital has not completely left the cryptocurrency market, but investors are choosing to withdraw their funds from exchanges and observe developments.
The analysis also noted that spot Bitcoin ETFs traded in the US completed their second consecutive week with net money inflows. On July 20, approximately $271 million flowed into ETFs, with BlackRock’s IBIT fund leading the way with $116.5 million.
CryptoQuant noted that ETF inflows indicate a gradual return of institutional investor demand, but these inflows are not yet enough to pull spot trading volume out of the “cooling” zone.
According to the company, the recent rise in Bitcoin began with a squeeze of short positions, continued with leveraged trading, and was partly supported by ETF inflows. However, the weak participation in the spot market means that the rise is not yet firmly established.
*This is not investment advice.
