According to a new report published Thursday by crypto analytics firm CryptoQuant, Bitcoin’s rally in April was largely fueled by demand from the derivatives markets. Bitcoin surged nearly 20 percent that month, climbing from around $66,000 to $79,000. However, the report points out that this rise was not matched by demand in the spot market, signaling the dominance of short-term speculators rather than long-term buyers.
Warning signs in the spot market
CryptoQuant’s analysis highlights that the gap between price increases and declining spot demand is among the clearest on-chain signals of a market driven by speculation. In other words, the April rally was shaped by active trading among short-term participants, while more persistent, long-horizon investors remained largely on the sidelines.
The report also notes that the correction from the $79,000 peak last month echoes previous episodes when upward moves supported only by derivatives were followed by quick declines. At present, Bitcoin is trading just under $77,000, reflecting a 2.1 percent increase in the last 24 hours.
The CryptoQuant report emphasizes, “The divergence between price growth and falling spot demand is one of the most evident on-chain signals that the rally is driven more by speculation than by structural demand.”
Similarities to the 2022 bear market model
Another noteworthy observation in the report is that the current demand pattern in Bitcoin resembles the early stages of the 2022 bear market. At that time, growing demand in derivatives alongside declining buying activity in the spot market preceded an extended price drop.
CryptoQuant shares its assessment by stating, “Historically, this combination signals a substantial downside risk when Bitcoin is in a bear market regime.”
Bitwise offers a different perspective: Focus on institutional buying
Contrary to CryptoQuant’s caution, Bitwise’s investment chief Matt Hougan presented an alternative view in a note published Tuesday. Hougan attributes Bitcoin’s recent surge mainly to institutional purchases, particularly strong inflows into ETFs since March 1 totaling $3.8 billion, and the renewed participation of major long-term investors. These factors, he argues, have played key roles in the latest rally.
The note states, “Several factors are behind the recent price increase: substantial ETF inflows, the return of long-term investors, but the leading driver appears to be institutional buying.”
The report concludes by noting that CryptoQuant’s Bull Score Index, which measures market sentiment, dropped from 50 to 40 in April. The index falling back to 40 is highlighted as a sign that bearish sentiment is taking hold, a level historically associated with periods of ongoing price weakness.
