CryptoQuant, a crypto-analytics firm, believes that Bitcoin is likely to experience a price drop lasting several months after an April rally fueled primarily by traders of futures, while demand for spot bitcoins declined.
Bitcoin rose from $66,000 in early April to $79,000 at its peak in an uprising of around 20% “driven entirely by growth in perpetual futures demand,” CryptoQuant is a cryptocurrency that was said by a report This Thursday.
During the rally, demand for Bitcoin on spot decreased. “indicating that the market’s marginal buyer was speculative, not fundamental,” I said.
“The divergence between rising price and contracting spot demand is one of the clearest on-chain signals that price gains are speculative rather than structural,” CryptoQuant has been added.
Bitcoin trading around $77,000 As of the writing, bitcoin has risen by 2.1% within the last 24 hour. CryptoQuant says Bitcoin’s decline from $79,000 a month ago is consistent with rallies driven only by high futures demand.
Bitcoin demand today is similar to that at the end of 2022’s bear market when spot demand fell and futures demand surged. “ultimately preceded a sustained price decline.”
Source: CryptoQuant
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“History suggests this setup carries meaningful downside risk as Bitcoin remains in a bear market regime,” CryptoQuant said.
This report contrasts with a brief note on Tuesday Bitwise Chief Investment Officer Matt Hougan said that the Bitcoin Treasury company Strategy was the “single biggest factor” Bitcoin is currently on a rally.
“There have been multiple drivers of the recent rally, including strong buying from ETFs [exchange-traded funds], $3.8 billion since March 1, and renewed purchases by long-term holders. But Strategy has been the single biggest factor,” Hougan argued.
CryptoQuant said that its Bull Score Index (which analyzes the market and network activities to gauge sentiment on a 100-point scale) fell from 50 in April to 40 despite price increases.
“The Bull Score returning back to 40 indicates conditions are ‘getting bearish’ and places the market in the same range that historically preceded continued price weakness,” CryptoQuant said.
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Source: cointelegraph.com
