- Spot traders in the market over the past week purchased twice the amount of BTC that institutional investors sold.
- Divergence in liquidation and buying volume in the derivatives market suggested room for a possible rally.
Activity in the cryptocurrency market has been largely bearish, with market capitalization dropping to $3.15 trillion.
Bitcoin’s [BTC] movement, despite this drop in the past week, has been minimal, with the asset losing 0.47% during this phase.
Analysis shows that spot market traders’ acquisition of BTC has played a major role in maintaining this market level—new market metrics indicate a potential price bounce on the horizon.
Spot traders buy more BTC as institutional investors sell
In the past week, Bitcoin spot ETFs in the U.S. saw a net market outflow of -$552.5 million. This means there was more selling activity amounting to this figure.
Such a major outflow usually indicates bearish sentiment and can lead to market turmoil. However, Bitcoin remained relatively stable.
AMBCrypto’s analysis found that while U.S. institutional investors kept selling, spot traders bought more, offsetting the impact.
According to Coinglass, during the past week, exchange netflow turned negative. $1.07 billion worth of BTC was purchased from the market and moved into private wallets.
Source: Coinglass
When a massive buy, nearly twice the institutional sales, occurs, it means spot traders are more bullish. If this buying trend from this cohort continues, a major price surge is likely over time.
Korean and U.S. investors back down
This significant market purchase wasn’t driven by Korean and U.S. investors, which is usually expected during major spot market buying activity.
Currently, Korean retail investors have been consistently reducing their BTC purchases since February began. The Korean premium index has consistently dropped, now reading 2.18, the lowest level since the 18th of January.
Source: CryptoQuant
Similarly, U.S. retail investors have also been selling. At press time, the Coinbase Premium Index was negative, below 0, with a reading of -0.9. This suggests that retail investors have been selling and may continue to do so.
However, this presents an opportunity for BTC. If Korean and U.S. retail investors resume buying BTC, the asset is likely to experience a major price swing.
This would add to the existing buying momentum in the spot market.
Divergence creates an opportunity for a price surge
There has been a divergence in key market metrics in the derivatives market, suggesting a rally could be incoming.
At the time of writing, buying volume in the market has surged (outpacing selling) despite a massive wave of long liquidations.
CryptoQuant data shows that buying volume has increased significantly relative to selling volume, rising from a low of 0.92 to 0.99.
The moment the Taker Buy Sell Ratio crosses above one, it strengthens the current bullish sentiment brewing in the market.
Source: CryptoQuant
Interestingly, this massive purchase occurred despite a substantial long liquidation of $21.9 million. Long liquidations happen when the asset’s price moves against buy orders by derivative traders expecting an uptrend.
When buying activity surges despite the forceful closure of long contracts, it indicates high trader conviction. This suggests a likely price bounce to a higher level.
