Donald Trump’s recent victory in the U.S. presidential election ignited a significant surge in the cryptocurrency market, with Bitcoin (BTC) reaching an all-time high and pushing the total market cap of crypto beyond $2.7 trillion.
Bitcoin alone now boasts a market cap of $1.16 trillion, making it the ninth-largest financial asset globally. Over the past week, Bitcoin experienced a remarkable 17% increase, marking its second-best weekly performance of the year, just shy of a 22% rise earlier in March.
To gauge whether Bitcoin’s price might continue to rise or if it has hit a peak, it’s crucial to analyze who is driving the demand for Bitcoin—whether it’s coming from direct purchases or leveraged trading.
One key metric to consider is the spot cumulative volume delta (CVD), which tracks the net difference between buying and selling volumes, particularly focusing on who is taking the initiative in trades.
A significant portion of this activity is happening on Coinbase, a popular exchange among U.S. investors, which has seen a corresponding rise in its Premium Index.
Looking back over the past three years, spikes in Coinbase’s CVD often coincide with local price highs and lows. For instance, a notable spike occurred in March when Bitcoin surpassed its previous record of over $73,000, while similar spikes were observed during downturns like the collapses of Luna and FTX in 2022, indicating that savvy investors tend to buy at lower prices while others may buy at peaks.
There’s ongoing debate about whether the inflows into U.S.-listed spot exchange-traded funds (ETFs) are purely from spot buying or if they involve a strategy known as the basis trade.
This strategy allows investors to profit from the price differences between spot and futures markets by holding long positions in ETFs while shorting futures contracts.
Since the introduction of these ETFs at the beginning of the year, there were substantial inflows, but Bitcoin’s price has remained relatively stable, suggesting that the ETFs may not have had the anticipated impact on prices.
A recent report indicated that about 40% of ETF inflows were attributed to basis trading. Despite record ETF inflows, the open interest in CME futures has not seen a corresponding increase.
Bitcoin analyst Checkmate noted that the inflows into spot Bitcoin ETFs have significantly outpaced the growth in CME open interest, indicating a return to genuine spot buying. As momentum builds, there may be a wave of buyers driven by the fear of missing out on potential gains.
