Bitcoin‘s price continues to rise, fueled by an emerging trend in spot market demand, according to CryptoQuant analyst Avocado Onchain. Recent data highlights a shift in investor behavior, with long-term investors driving the cryptocurrency’s upward momentum, while speculative activity in the futures market has cooled.
The analyst’s findings offer insights into Bitcoin’s ongoing bull cycle, which began in the first half of 2023. Initially, the futures market played a significant role in Bitcoin’s price growth, reflecting a speculative phase dominated by short-term traders. However, this rally faced a pause earlier this year, as both the futures and spot markets saw reduced trading activity beginning in March.
Since October, Bitcoin has seen renewed market activity, with trading volumes rising across both markets, providing fresh support for its price surge. Despite this, Avocado Onchain notes a key trend: futures market activity has recently slowed, while demand in the spot market has steadily increased.
The spot market refers to the immediate purchase of Bitcoin on exchanges, typically driven by long-term investors. This contrasts with the futures market, where traders speculate on Bitcoin’s price movements through contracts that do not involve immediate ownership of the asset.
Avocado suggests that this shift away from speculative excess in the futures market is a positive sign for Bitcoin’s stability. Historically, overheated futures markets have led to increased volatility and liquidations. However, the cooling of futures activity, combined with growing demand in the spot market, signals a more sustainable form of buying pressure that could support Bitcoin’s long-term growth.
Looking ahead, Avocado predicts that while the futures market may continue to experience cycles of overheating and liquidations, these fluctuations are likely to contribute to Bitcoin’s overall price growth. This in turn could drive further capital inflows into the spot market.
The analyst also pointed to Bitcoin’s 30-day exponential moving average (EMA) of its funding rate, which shows no signs of late-cycle overheating. The funding rate, which measures the cost of holding futures contracts, is often used as an indicator of market sentiment. A balanced funding rate suggests that Bitcoin’s price movements are not solely driven by leveraged positions, reducing the risk of sudden price reversals.
With spot market demand strengthening and futures market volatility stabilizing, Bitcoin appears poised for sustained growth in the long term.
Related topic:
CFDs vs Futures: What is the Difference?
