Bitcoin Needs Stronger Spot Demand to Sustain Rally

Bitcoin's recent 42.5% quarterly gain is impressive, but analysts at Bitfinex warn that stronger spot demand is needed to sustain a continued advance.

Falling futures open interest, which has reduced leverage and speculative positions, doesn't automatically translate to bullish sentiment, the team said. Instead, it highlights the need for buyers willing to acquire Bitcoin directly in the spot market.

The analysts pointed out that U.S. ETF buying has slowed despite continued inflows, with daily purchases falling closer to the amount of new Bitcoin entering circulation. They noted that a recovery above $85,000 could ease selling pressure and lift the share of Bitcoin supply in profit above 75%, indicating a potential new bull phase.

In assessing the strength of buying, Wojciech Kaszycki, strategy adviser to BTCS S.A., looks for sustained ETF inflows over weeks, comparing growth in outstanding futures contracts with Bitcoin's price. He warned that risk could increase if borrowed positions grew faster than cash demand.