Bitcoin The recovery from the February lows, which had started to look like a new uptrend, hit a wall last week at the 200-day simple moving average (SMA) positioned just above $82,000. Since then, prices have returned to $77,500, in a move reminiscent of 2022, when a 43% rebound failed at the same indicator before Bitcoin resumed its decline.
The latest report from analytics firm CryptoQuant offers a compelling explanation for why the rally failed to break above the critical average, a long-term trend line that traders often view as the dividing line between a bear market rebound and a true recovery.
The biggest problem is demand.
CryptoQuant says the rally in April and early May was supported by three things: leveraged futures purchases, spot demand, and inflows into U.S. ETFs. All three are now weakened. The company’s Bull Score rose from 40 to 20, a level the company describes as “extremely bearish” and which corresponds to the February-March period when bitcoin was trading between $60,000 and $66,000.
The most obvious cross-check is Coinbase’s Bitcoin premium, which remained negative through much of the May rally and subsequent correction, CryptoQuant points out in the report.
The premium measures whether bitcoin trades higher on Coinbase than on offshore platforms; a positive result is taken as a sign of relatively stronger US demand, a negative result as evidence that US investors are not paying for their exposure.
US spot Bitcoin ETFs have turned into hot sellers. Weekly data from SoSoValue shows that products lost about $979.7 million in the week ended May 19, on top of outflows of about $1 billion from the previous week. The reversal follows six straight weeks of capital inflows that have helped fuel the recovery.
Is there a demand?
The Korean kimchi premium, which measures demand for BTC on Korean exchanges, has fallen below zero, according to CryptoQuant data, meaning there is no higher-than-normal demand on the country’s exchanges.
Elsewhere in Asia, Hong Kong’s three spot Bitcoin ETFs, run by ChinaAMC, Bosera Hashkey and Harvest, rarely cleared a few million dollars in combined daily volume until May.
If the correction deepens, CryptoQuant identifies $70,000, the price realized on-chain by traders, as the next major support on-chain. This level capped the rallies in October and January. This time, we should hold them back.
