Bitcoin Price Momentum Shifts as Spot Market Demand Surges
Bitcoin's price continues to rise, driven by increased spot market demand, as indicated by CryptoQuant analyst Avocado Onchain. This shift highlights a growing influence from long-term investors, while speculative activity in the futures market has decreased.
Bitcoin Spot Market Demand Gains Strength
Avocado notes that Bitcoin's current bull cycle began in early 2023. Initially, the futures market dominated price movements, indicating speculative trading. However, both futures and spot markets saw reduced activity starting in March 2023. Since October, trading volumes have risen again, supporting Bitcoin's upward trend.
The analyst observed that while futures market activity has declined, spot market demand has been steadily increasing. Spot market transactions involve immediate purchases of Bitcoin, favoring long-term investors, unlike the futures market where traders speculate without immediate ownership.
Spot Market Demand Takes the Lead as Bitcoin Continues Its Upward Momentum
“While futures market activity has declined, spot market demand continues to increase. This suggests that speculative excess in the futures market is cooling, while buying pressure in the spot market is… pic.twitter.com/M4o4TsG02V
— CryptoQuant.com (@cryptoquant_com) December 17, 2024
What This Means For BTC
This trend indicates that speculative excess in the futures market may be stabilizing. Overheated futures markets historically lead to volatility and liquidations. The combination of reduced futures activity and rising spot demand suggests a more stable buying pressure that could support Bitcoin's long-term growth.
Looking ahead, the futures market is likely to undergo cycles of overheating and liquidations, contributing to Bitcoin’s price growth and encouraging further capital inflows into the spot market.
Avocado also highlighted the 30-day exponential moving average (EMA) of Bitcoin’s funding rate, which shows “no signs of late-cycle overheating.” The funding rate reflects the cost of holding futures contracts and serves as an indicator of market sentiment. A balanced funding rate implies that Bitcoin's price movements are not solely influenced by leveraged positions, which reduces the risk of sudden price reversals.
Featured image created with DALL-E, Chart from TradingView