CryptoQuant Analyst Sunny Mom: Bitcoin Spot Buying Remains Tepid as Funds Stay on the Sidelines

CoinCircle (120btc.CoM): Bitcoin (BTC) has surged from around $64,000 to successfully break through the critical psychological level of $66,000 in just two days. However, this seemingly strong rally has raised concerns among market experts. On July 22, Beijing time, CryptoQuant analyst Sunny Mom published an article exploring whether "this is a real capital inflow or just another leveraged-driven frenzy?"

Short Squeeze Ignites Rally, Leverage Fuels the Fire
Sunny Mom delved into the data from the derivatives market, pointing out that the catalyst for this price increase was actually a typical "short squeeze." Between July 18 and 19, as bearish bets were liquidated, the funding rate briefly turned negative, igniting the rebound.

Notably, alongside the price increase, the Open Interest surged from approximately $21.2 billion to a historic high of $23 billion. This indicates that the momentum driving the price rise is not solely due to short covering but also a significant influx of new leveraged long positions. Although the current funding rate remains moderate without signs of overheating, the characteristics of derivatives traders amplifying market volatility are already quite evident.

Spot Buying Remains Tepid, Funds Stay on the Sidelines
In contrast to the bustling derivatives market, the performance of the spot market appears rather lackluster. According to CryptoQuant's data, spot trading volumes have been in a "cooling" mode since April this year, showing no signs of improvement even during today's breakout. Meanwhile, futures trading volumes have only maintained a "neutral" level.

In terms of capital flow, the net flow of stablecoins on exchanges has shown negative values. However, Sunny Mom added that the overall market capitalization of stablecoins has not collapsed but has merely slowed in growth. This indicates that funds have not completely fled the cryptocurrency market but have chosen to withdraw from exchanges and hold off on trading.

ETF Capital Inflow Slow, Analysts Warn of Sudden Drop Risks
Despite the overall weakness in the spot market, there are signs of institutional capital gradually entering the market. The U.S. Bitcoin spot ETF has recorded net inflows for the second consecutive week, with approximately $271 million pouring in on July 20 alone, led by BlackRock's IBIT with $116.5 million. However, this institutional buying power is still insufficient to pull the overall spot trading volume out of the cooling zone.

Sunny Mom concluded in the article that this rebound was triggered by a short squeeze and sustained by leverage. Although ETF funds are gradually returning, their scale has not yet reached a significant level. He specifically warned that when the upward momentum fades, such a market structure, which lacks spot support and heavily relies on leverage, is often prone to sharp corrections. Investors should be cautious and avoid blindly chasing highs until spot trading volumes truly recover.