Bitcoin’s The recovery from the February lows, which looks like a new bull run, hit a brick wall at the 200-day simple moving average (SMA) above $82,000 last week. The price has since fallen back to $77,500, a move reminiscent of 2022 when a 43% rally on the same metric failed to materialize before Bitcoin resumed its decline.
A new report from analytics firm CryptoQuant offers a compelling explanation as to why the rally failed to break above key averages, which long-term trendline traders often view as the dividing line between a bear market rally and a true recovery.
The bigger problem is demand.
CryptoQuant said the rally in April and early May was underpinned by three things: leveraged futures buying, spot demand and U.S. ETF inflows. All three are now in decline. The company’s Bull Score Index has fallen from 40 to 20, a level the company calls “extremely bearish” and comparable to when Bitcoin traded between $60,000 and $66,000 between February and March.
CryptoQuant pointed out in the report that the most obvious cross-check is Coinbase’s Bitcoin premium, which has remained negative during the May rally and subsequent correction.
The premium measures whether Bitcoin trades at a higher price on Coinbase than on offshore exchanges; positive readings are seen as a sign of relatively strong U.S. demand, while negative readings suggest U.S. investors are not paying for the risk.
The U.S. Spot Bitcoin ETF also turned to sellers. Weekly data from SoSoValue shows the products lost about $979.7 million in the week ended May 19, compared with about $1 billion in outflows the previous week. The reversal comes after six straight weeks of inflows fueling gains for stocks.
Are there still needs?
According to CryptoQuant data, the kimchi premium, which measures demand for BTC on South Korean exchanges, has fallen below zero, meaning demand on the country’s exchanges is not higher than normal.
Elsewhere in Asia, the combined daily trading volumes of three Hong Kong spot Bitcoin ETFs run by ChinaAMC, Boshi Hashbase and Harvest rarely reached millions of dollars as of May.
If the correction deepens, CryptoQuant identifies traders’ on-chain realized price of $70,000 as the next major on-chain support. This level capped the October and January rallies. This time, they must be held back.