Why is the current spot demand in the crypto market strong while derivatives lag behind?

Source: Glassnode; Compiled by Wuzhu, Golden Finance

Summary

• Bitcoin has risen from $35,000 to a local high of $104,000, thanks to a sharp increase in on-chain transaction volume.

• In particular, a large number of transactions appear to have been completed in the $93,000 to $95,000 range, which has now become a key level of short-term support.

• Off-chain spot fund flows have also turned positive, with strong net buying pressure on Coinbase and weaker selling pressure on Binance. This shows that "buy on the dip" behavior is still dominant on the two major exchanges.

• ETF inflows peaked at $389 million per day on April 25, helping to drive Bitcoin's rise, but have since slowed to a more modest $58 million per day.

• The perpetual market appears to be lagging the spot market as open interest is driven by a short squeeze, which has resulted in many accounts that were betting on Bitcoin to rise being liquidated.

Spot Demand Is Strong

Since hitting a low of $75,000 on April 9, the Bitcoin market has experienced a strong spot-driven rally with clear sideways accumulation phases between each rally.

We can see this stair-step pattern in the Cost Basis Distribution (CBD) heat map, which shows clusters of supply accumulating at similar price levels over the past three months.

From this, we can see the accumulation mechanism that formed before each rally, culminating in the latest rally to $104,000.

Looking at the past 30 days, we can also see that a key accumulation area has emerged between $93,000 and $95,000. This range is highly consistent with the short-term holders' cost basis (representing investors who entered the market in the past 155 days).

Therefore, if the market experiences a short-term pullback, this area is likely to serve as strong support, representing an area of ​​demand where investors may see value again.

Positive Bias in Spot Flow

In addition to these on-chain signals, off-chain order flow indicators can also provide valuable insight into market sentiment and bias. One such indicator is the spot cumulative volume delta (CVD), which tracks the net buying or selling pressure in the spot order book. We can assess the strength and directional bias of the spot market by studying this indicator across major exchanges.

The chart below highlights the spot CVD indicator for Binance and Coinbase. Coinbase has been in a sustained net buying phase since mid-April, with CVD peaking at +$45m/day, consistent with the market accelerating higher. In contrast, Binance markets have shifted from strong net selling pressure of -$71m/day in mid-March to a more moderate -$9m/day today, reflecting a significant decrease in sell-side pressure.

The alignment between on-chain accumulation and off-chain spot demand helps establish that the move to $104k was supported by genuine dip-buying activity. Ideally, the confluence of buyer strength on both dimensions will continue to play out to maintain a medium-term bullish outlook.

Measuring Institutional Investor Interest

Traditional investor participation in the Bitcoin market has continued to grow, especially since the launch of spot ETFs. Monitoring inflows and outflows from these products can provide valuable insights into institutional investor sentiment, beliefs, and demand. Notably, weekly average net inflows into ETF wallets peaked at $389 million/day on April 25, coinciding with a surge in spot-driven buying and supporting the rally in Bitcoin prices toward $104,000. Since then, ETF inflows have fallen to around $58 million/day.

The flows of funds in these ETFs indicate that institutional investor interest in Bitcoin remains relatively strong, with inflows comparable to the market rally period before 2024.

Approaching Highs

With Bitcoin currently trading just below its all-time high of $109,000, signs of renewed excitement are beginning to emerge in the market. One of the most sensitive tools to track this shift is the short-term holder (STH) supply profit-loss ratio, which reflects the changing sentiment of active investors.

The indicator was particularly important during the April 7 pullback, when the ratio fell to 0.03, indicating that almost all of the STH-held supply was in the red. This level was hit when the market hit a low of $76,000, and since then, the ratio has surged above the critical threshold of 9.0, meaning that over 90% of STH supply is now back in profit.

Generally speaking, high values ​​can coincide with risky market conditions as investors begin to take profits. These conditions can persist for a while, but they often precede profit-taking phases or the formation of local tops if new demand inflows slow.

As long as the ratio remains well above its equilibrium level of 1.0, bullish momentum tends to hold. However, any sustained break below this level could signal a major shift in market power and a possible trend exhaustion.

Profit-taking begins, but there is still room to go

Given that short-term holders (STH) are currently holding unrealized gains, it is normal to expect some increase in profit-taking activity. Monitoring the behavioral rebound of this group is key to determining when demand exhaustion may be approaching near a potential local top.

Recently, the magnitude of STH realized profits has surged to nearly +3 standard deviations above the 90-day average, reflecting a significant rise in profit realizations. In past cycles, especially during the run-up to all-time highs, the indicator’s all-time highs have climbed above +5 standard deviations. This suggests that it often takes stronger profit-taking pressure to overwhelm the inflow of demand.

DERIVATIVE MARKETS LAGGER

While strong performance in the spot market is closely associated with the recent rally, traders in the derivatives market are taking longer to adjust. A more effective tool for measuring market sentiment in the space is the open interest (OI) of the perpetual contract market, denominated in Bitcoin (BTC). Tracking the weekly change in open interest (OI) across major platforms can provide insight into whether speculators are expecting market moves or are surprised by them.

Since January 2025, the indicator has shown its usefulness in identifying points where investors are surprised by market moves, and investors are usually forced to close their positions. During the price drop below $80,000, the market experienced multiple weekly contractions of open interest (OI) of more than 10%. This clearly shows that over-leveraged long positions were forced to close as prices approached liquidation levels.

Interestingly, a similar situation was seen during the recent rally above $90,000, with a similar contraction in open interest (OI), only this time the contraction indicated a short squeeze. Such shocks are characteristic of a healthy reset of derivatives positions and are often seen in the early stages of a new market trend. The presence of such squeezes suggests that this rally has cleared out excess leverage, setting the stage for a stronger uptrend.

As leveraged short positions were liquidated, futures open interest fell 10% from 370,000 BTC to 336,000 BTC. This drop gives us a rough idea of ​​the scale of the squeeze. This process also reduces the likelihood of an unhealthy deleveraging event and may weaken the potential for short-term price volatility.

The relatively light long positions in the perpetual contract market are another key signal that derivatives are catching up with the momentum of the spot market. Funding rates on major exchanges are one of the most effective tools to measure the directional bias of these markets, and they have remained neutral over the past few weeks despite the bullish momentum in the market.

As shown in the figure below, the average and individual funding rates have been steadily recovering since late April and are currently hovering around 0.007% (7.6% annualized). The rise reflects a positive shift, suggesting that the perpetual market is not overly biased towards long exposure. Long leverage in the market appears limited at this point, which is a healthy sign. Options Markets Are Heating Up A complementary lens on market sentiment can be found in options market data, particularly through the 1-month 25 Delta Skew. The indicator is calculated as the implied volatility (IV) of the 25 Delta Put minus the implied volatility of the 25 Delta Call. As a result, a negative skew indicates that call options are more expensive than put options, suggesting that traders are betting more aggressively on the upside, which is often a sign of underlying bullish sentiment.

Currently, the 25 Delta Skew (1-month) has fallen to -6.1%, meaning that call options are offering significantly higher implied volatility than put options. This reflects a clear behavioral shift in risk appetite, as options traders prefer to speculate on the upside rather than hedge downside risk.

While a persistent negative skew is not a clear signal in itself, a persistent negative skew, especially after a strong rally, is often consistent with rising market optimism. For the options market to remain in sync with the bullish spot dynamics, we would like to see this skew remain below or near neutral levels, thus increasing confidence in the strength of the rally.

Conclusion

Bitcoin's rally back to all-time highs was driven primarily by the spot market, underpinned by strong on-chain positions and supportive off-chain flows. Demand appears to have come primarily from spot ETFs and large spot exchanges such as Coinbase.The emergence of key cost basis support around $95,000 and a cooling of selling pressure further added to the strength of this uptrend.

However, the derivatives market appears to be catching up, with open interest and funding rates yet to fully align with the upward momentum in the spot market. Positioning in options markets reflects a cautious but optimistic outlook, while there are currently few signs of excessive long leverage in futures markets.