Where the Demand Comes From as Bitcoin Breaks Through $82K: Van Straten

As a seasoned crypto investor with a decade of experience under my belt, I have witnessed firsthand the rollercoaster ride that is the cryptocurrency market. Last week’s 17% surge in bitcoin was reminiscent of the days following Donald Trump’s election victory, when we saw similar gains.

The unexpected win of Donald Trump in the U.S. presidential election led to an exciting period for cryptocurrencies, as bitcoin (BTC) reached an all-time high, and the total value of all cryptocurrencies exceeded $2.7 trillion – a record for the year.

Currently, Bitcoin holds a market value of approximately $1.16 trillion, making it the ninth most valuable financial asset globally when ranked by market capitalization. This digital currency experienced one of its second-best weekly growths this year, increasing by 17%. This increase is slightly less than the 22% rise recorded in the week ending March 3, as indicated by data from Glassnode.

To determine if Bitcoin might potentially increase further or if this indicates a temporary peak, it’s crucial to comprehend who is purchasing Bitcoin and whether the rise is due to spot purchases or leveraged trading activity.

Coinbase spot volume soars

Initially, let’s take a look at the Cumulative Volume Delta (CVD), a metric coined by Glassnode. Essentially, this measure quantifies the net change between buying and selling volumes, emphasizing instances where either the buyer or seller was the instigator. It encompasses transactions involving USD or currencies linked to the dollar, which can be both fiat and stablecoins.

A significant portion of cardiovascular disease (CVD) cases is linked to Coinbase, a popular cryptocurrency trading platform among U.S. investors and financial institutions. This trend corresponds with an increase in the Coinbase Premium Index.

Over the last three years, it’s evident that when Coinbase’s Chaikin Money Flow (CVD) peaks, it usually happens close to significant highs and lows. In March, a particularly high CVD reading emerged as Bitcoin hit its previous peak of around $73,000. Additionally, high CVD levels were also observed near cycle troughs during the Luna and FTX crash in 2022. This pattern suggests that savvy investors are buying at market bottoms, while others tend to buy when prices are reaching their peaks.

Basis trade or true bitcoin buying

There has been extensive discussion on whether investments into U.S. stock market ETFs represent simple spot purchases, or if they are employed as part of a more complex trading strategy called ‘basis trading’.

One way to rephrase the given text in a natural and easy-to-read manner could be: A basic trading strategy is used to make a profit by exploiting differences between current prices (spot prices) and future prices. This strategy involves an investor simultaneously holding a long position in a stock exchange-traded fund (ETF) while shorting, or borrowing and selling, the same asset’s futures contracts on the Chicago Mercantile Exchange (CME). The goal is to profit from the price difference between these two markets.

Initially, at the beginning of the year, the introduction of ETFs was accompanied by significant investments. However, since then, bitcoin has primarily maintained its value, indicating that the ETFs may not have significantly impacted the price as many investors assumed. This is largely because these ETFs employ a delta-neutral approach in their operations.

Recently, the CEO of crypto index provider CF Benchmarks mentioned to CoinDesk that about 40% of the inflows into Exchange Traded Funds (ETFs) were due to a trading strategy known as ‘basis trade’. Yet, despite the ETF inflows consistently breaking records, the number of open interests in the CME exchange has not mirrored this trend.

Bitcoin analyst Checkmate has also observed this trend:

Last week, inflows into Bitcoin ETFs significantly surpassed the increase in CME open interest, indicating a strong resurgence in direct spot buying. It’s expected that Monday will bring a wave of FOMO (Fear Of Missing Out) and momentum buyers, as some investors are anxious to avoid missing out on this rally.

Exchange balance hits year-to-date low

According to Glassnode’s data, the amount of Bitcoin stored on exchanges has reached its lowest point this year at approximately 2.95 million coins. Since the November 5th election, there has been a decrease of around 40,000 Bitcoin, and it seems that various platforms like Coinbase, Binance, and Bitfinex are experiencing increased demand for Bitcoin. This reduction in exchange balances suggests that Bitcoin owners are interested in purchasing more Bitcoin.