Bitcoin The recovery from the February lows, which had begun to look like a new bull run, hit a wall last week at the 200-day simple moving average (SMA) located just above $82,000. Prices have since retreated to $77,500 in a move reminiscent of 2022, when a 43% relief rally failed on the same indicator before bitcoin resumed its decline.
The latest report from analytics firm CryptoQuant offers a compelling explanation for why the rally failed to break above the critical average, a long-term trend line that traders often treat as the dividing line between a bear market rebound and an actual recovery.
The biggest problem is demand.
CryptoQuant says the rally in April and early May was supported by three things: leveraged futures buying, spot demand, and US ETF inflows. All three have now weakened. The company’s Bull Score has fallen from 40 to 20, a level the company calls “extremely bearish” and that coincides with the February-March period when bitcoin was trading between $60,000 and $66,000.
The clearest cross-check is Coinbase’s bitcoin premium, which has remained negative throughout much of the May rally and subsequent correction, CryptoQuant notes in the report.
The premium measures whether bitcoin is trading higher on Coinbase than offshore; a positive reading is treated as a sign of relatively stronger US demand, and a negative reading as evidence that US investors are not paying for the exposure.
US spot bitcoin ETFs have become sellers to match. SoSoValue’s weekly data shows that products lost about $979.7 million in the week ending May 19, on top of about $1 billion of outflows from the previous week. The reversal comes after six consecutive weeks of capital inflows that helped fuel the rally.
Is there any demand?
The Korean kimchi premium, which measures demand for BTC on Korean exchanges, has fallen below zero, according to data from CryptoQuant, meaning there is no higher-than-normal demand on the country’s exchanges.
Elsewhere in Asia, Hong Kong’s three spot bitcoin ETFs, managed by ChinaAMC, Bosera Hashkey and Harvest, have rarely cleared a few million dollars in combined daily volume as of May.
If the correction deepens, CryptoQuant identifies $70,000, the realized on-chain price from traders, as the next major on-chain support. That level limited the rallies of October and January. This time, he would have to stop them.
