Spot Leads, Derivatives Lag

Executive Summary

• Bitcoin has rallied from $35k to a new local high of $104k, supported by substantial accumulation, visible in on-chain volumes.
• In particular, significant coin volumes appear to have changed hands in the $93k 95k range, which now acts as a key level for short-term support.
• Off-chain spot flows also turned positive, with Coinbase seeing intense net buying pressure, and Binance sell-pressure cooling off. This indicates ‘buy-the-dip’ behaviour remains dominant across the two major exchanges.
• ETF inflows peaked at $389M/day on 25-April, helping to fuel the rally, but have since slowed to a more modest $58M/day.
• Perpetual markets appear to lag behind spot markets, as open interest contracts were due to a short squeeze, which liquidated many accounts that were betting against the move higher.

Strong Spot Demand

Since the $75k price low was set on 9-April, Bitcoin markets are experiencing a strong spot-driven rally, with noticeable sideways accumulation phases between each move higher.

We can see this stair-stepping pattern in the Cost Basis Distribution (CBD) heatmap, which presents supply clusters accumulated at similar price levels over the last three months.

From this, we can see the accumulation regimes formed before each leg higher, culminating in the latest move to $ 104k.

Focusing on the last 30 days, we can also see that a key accumulation zone emerged between $93k and $95k. This range aligns closely with the Short-Term Holder cost basis, representing investors who entered the market within the past 155 days.

As a result, this zone is likely to act as a strong support level in the event of any short-term market pullback, representing a demand zone where investors are likely to see value once again.

A Positive Bias in Spot Flows

In addition to these on-chain signals, off-chain order flow metrics offer valuable insights into market sentiment and bias. One such indicator is the Spot Cumulative Volume Delta (CVD), which tracks the net taker-side buy or sell pressure in spot order books. We can evaluate the strength and directional bias within spot markets by examining this metric across major trading venues.

The chart below highlights the spot CVD metric for Binance and Coinbase. Since mid-April, Coinbase has experienced a regime of consistent net buying, with CVD peaking at +$45M per day, aligning with the acceleration of the market higher. In contrast, Binance markets have transitioned from an intense net selling pressure of -$71M per day in mid-March, to a milder -$9M daily today, reflecting a notable cool-down in sell-side pressure.

The consistency between on-chain accumulation and off-chain spot demand helps establish that the rally to $104k was supported by genuine dip buying activity. This confluence of buyer strength across both dimensions would ideally remain in play to sustain a mid-term bullish outlook.

Gauging Institutional Interest

Traditional investor participation has grown in the Bitcoin market, especially since the launch of the spot ETFs. Monitoring these products’ flows in and out can offer a valuable lens into institutional sentiment, conviction, and demand. Notably, the weekly average net inflow to ETF wallets peaked at $389M/day on 25-April, coinciding with the surge in spot-driven buying, and supporting the rally toward $104k. ETF inflows have since cooled off to around $58M/day.

These ETF flows show that institutional interest in Bitcoin remains relatively robust, with inflows being of a similar magnitude to those seen during previous market rallies in 2024.

Approaching The Highs

With Bitcoin now trading just below its all-time high of $109k, signs of excitement are beginning to re-emerge in the market. One of the most responsive tools to track this transition is the Short-Term Holder (STH) Supply in Profit/Loss Ratio, which captures the shift in sentiment amongst active investors.

This metric was particularly insightful during the correction on 7-April, when it sank to 0.03, indicating that nearly all STH-held supply was now underwater. This level was hit as the market tagged the $76k low, and since then, the ratio has surged above the critical threshold level of 9.0, meaning more than 90% of STH supply is now back in profit.

Generally speaking, high values can align with higher-risk market conditions, as investors start to take profit. These conditions can persist for some time, but they often precede profit-taking phases or a local top’s formation if fresh demand inflows slow down.

So long as this ratio remains well above the equilibrium level of 1.0, bullish momentum tends to stay intact. However, any sustained drop below this level would signal a meaningful shift in market strength and possible trend exhaustion.

Profit-Taking Begins, But With Room to Run

With short-term holders (STHs) now sitting on unrealized gains, it's natural to expect an uptick in profit-taking activity. Monitoring this cohort’s behavior rallies is key to identifying when demand exhaustion may be approaching around a potential local top.

Recently, the magnitude of STH Realized Profit has surged to almost +3 standard deviations above its 90-day average, reflecting a notable uptick in profit realization. In past cycles, particularly during rallies towards the ATH, this metric has historically climbed to over +5 standard deviations or more. This signals that much stronger profit-taking pressure is often required to overwhelm the inflow of demand.

Derivatives Markets Lag Behind

While spot market strength can be linked to the recent rally, traders in derivatives markets have taken longer to adjust. One of the more effective tools for gauging sentiment in this arena is the open interest (OI) in perpetual futures markets, denominated in BTC. Tracking the weekly change in OI across major platforms provides insights into whether speculators were expecting, or surprised by, market moves.

Since January 2025, this metric has shown its utility in identifying points where investors were surprised by the move, often being squeezed out of their positions. During the price drop below $80k, the market experienced multiple OI contractions of more than 10% per week. This is a clear sign that over-leveraged long positions were being forcefully closed as prices approached their liquidation levels.

Interestingly, a similar dynamic has unfolded during the recent rally above $90k, with a similar contraction in OI, except this time signalling a short-side squeeze. These types of shakeouts are characteristic of healthy resets in derivative positioning and are often seen during the early phases of a new market trend. The presence of such squeezes suggests that the rally has purged excessive leverage, laying the groundwork for a more robust uptrend.

As leveraged short positions were flushed out, futures open interest has declined by -10%, dropping from 370k BTC to 336k BTC. This reduction gives us a sense of scale for how large the short squeeze was. This process also lessens the probability of an unhealthy deleveraging event, and likely softens the potential for volatility in near-term price action.

The relatively light long positioning in the perpetual futures market is another key signal of derivatives playing catch-up with spot market momentum. The funding rate for major exchanges is one of the most effective tools to gauge the directional bias in these markets, and for the last few weeks, it has been remarkably neutral, despite the bullish market impulse.

As shown in the chart below, mean and individual funding rates have been steadily recovering since late April, currently hovering around 0.007% (7.6% per year). This uptick reflects a constructive shift, suggesting the appetite for long exposure in the perpetual markets is not excessive. There appears to be limited long-side leverage in the market at this stage, which is a healthy sign.

Options Are Warming Up

A complementary lens into market sentiment can be found in options market data, specifically through the 1-Month 25 Delta Skew. This metric is calculated as the implied volatility (IV) of 25-delta puts minus the IV of 25-delta calls. A negative skew, therefore, indicates that calls are more expensive than puts, suggesting that traders are speculating more aggressively on upside movement, often a sign of underlying bullish sentiment.

Currently, the 25 Delta Skew (1M) has dropped to -6.1%, meaning IV for calls is materially higher than for puts. This reflects a notable shift toward risk-on behavior, as options traders lean into bullish speculation rather than hedging against downside risk.

While not a definitive signal on its own, a sustained negative skew, particularly after a strong move higher, often aligns with rising market optimism. For the options market to remain in sync with bullish spot dynamics, we'd want to see this skew remain below or around neutral, reinforcing confidence in the rally’s strength.

Conclusion

Bitcoin’s rally back towards all-time highs has been largely spot-driven, underpinned by strong on-chain accumulation and supportive off-chain flows. Demand appears to be primarily via spot ETFs, and major spot exchanges like Coinbase. The emergence of a key cost basis support zone around $95k, and a cooling off of sell-side pressure further reinforces the strength of this uptrend.

The derivatives markets, however, appear to be playing catch-up, with open interest and funding rates yet to fully align with the upwards momentum in spot markets. Options market positioning reflects a cautious but optimistic outlook, whilst there are few signs of excessive long leverage in futures markets at this time.

Disclaimer: This report does not provide any investment advice. All data is provided for informational, and educational purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.

Exchange balances presented are derived from Glassnode’s comprehensive database of address labels, which are amassed through both officially published exchange information and proprietary clustering algorithms. While we strive to ensure the utmost accuracy in representing exchange balances, it is important to note that these figures might not always encapsulate the entirety of an exchange’s reserves, particularly when exchanges refrain from disclosing their official addresses. We urge users to exercise caution and discretion when utilizing these metrics. Glassnode shall not be held responsible for any discrepancies or potential inaccuracies. 

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