What Happened?
U.S. officials expect a thaw in relations, and Trump claims tariffs will significantly decrease, leading to an increasingly optimistic outlook on U.S.-China trade relations. Coupled with a resurgence of interest from institutional investors, Bitcoin prices have rebounded strongly, briefly surpassing $93,000.
Despite the price increase, on-chain analysis indicates underlying concerns in the market, including weakened demand momentum from new investors, relatively insufficient market liquidity, and still low participation from retail investors.
Analysts point out that this round of price increase is primarily driven by high leverage in the futures market rather than broad-based buying support from the spot market. This structure could make the rise less stable, and any shift in market sentiment or slight price corrections could trigger a chain reaction of liquidations, posing a challenge to the sustainability of the upward trend.
Optimism in Trade and Institutional Capital Flow Drives Bitcoin Past $93,000
The cryptocurrency market has recently shown strong momentum, with Bitcoin (BTC) experiencing a significant price surge yesterday (22nd), briefly crossing the $93,000 mark, with a nearly 7% increase within 24 hours.
This surge has been primarily fueled by renewed investor optimism and expectations of a potential thaw in the U.S.-China trade tensions, contributing to an overall heated market atmosphere. The market indicator CoinDesk 20 index rose between 5.2% and 7% in the past 24 hours, with Ethereum (ETH) increasing by 8% to surpass $1,700, and Dogecoin (DOGE) and SUI rising by 8.6% and 11.7%, respectively.
The main boost to market sentiment came from statements made by U.S. government officials. U.S. Treasury Secretary Scott Bessent indicated at a closed-door event that the current tariff stalemate with China is “unsustainable,” and expected a “thaw in the near future,” although he cautioned that a comprehensive agreement might take years.
Subsequently, President Trump told reporters that U.S. tariffs on China would “significantly decrease” from the current 145%, alleviating market concerns over an escalation of the trade war. Trump also expressed no intention of firing Federal Reserve Chairman Jerome Powell.
In addition to favorable macroeconomic news, the interest from institutional investors seems to be awakening once again. Recently, the U.S. dollar index has continued to weaken, partly due to President Trump’s dissatisfaction with Powell’s reluctance to lower interest rates under tariff-induced inflation pressures, raising concerns about the Fed’s independence.
Amid challenges in the traditional monetary system, Bitcoin, as a decentralized asset with a fixed supply and not controlled by any single entity, is gaining increasing attention for its characteristics as a store of value and hedge. Hedge fund QCP Capital analysts noted that funds are flowing from dollar-risk assets into Bitcoin and other hedging or anti-inflation assets.
Data shows that the U.S. spot Bitcoin ETF saw a net inflow of $381 million on April 21, reversing a previous outflow trend. On the corporate side, MicroStrategy, which has consistently purchased Bitcoin, announced the acquisition of an additional 6,556 BTC, bringing its total holdings to 538,200 BTC (valued at approximately $48.4 billion).
Potential Risks and Market Vulnerabilities
Although Bitcoin’s price has recently experienced a significant rebound due to favorable news, general market sentiment is optimistic. However, on-chain data analysis firm CryptoQuant has issued a warning, indicating that the current market rally is hiding vulnerabilities that could limit further increases or even trigger corrections.
Demand momentum has significantly weakened: Subsequent buying power is insufficient. CryptoQuant noted that the “demand momentum indicator,” which measures interest from new investors, has deteriorated to its lowest point since October 2024, showing that the market’s appeal to new funds is declining. While the net decrease in Bitcoin demand over the past 30 days (about 146,000 BTC) has improved compared to the sharp contraction in March, overall demand remains negative.
This means that, despite the price increase, the actual inflow of new buying power to the market, forming long-term holdings or increasing positions, is relatively weak. Without sustained new demand to support potential profit-taking sell pressure, the foundation for upward price movement may not be solid enough.
Market liquidity remains insufficient: Capital inflow is not yet abundant. The market capitalization growth of stablecoin USDT is often seen as an important reference indicator for overall liquidity in the cryptocurrency market, as it is one of the main mediums for entering and exiting the crypto market.
Data indicates that over the past two months, USDT’s market capitalization increased by only $2.9 billion, a growth rate that not only falls below its 30-day average but also well below the historical threshold of over $5 billion in monthly growth commonly seen during large-scale, sustained Bitcoin rebounds.
Insufficient liquidity suggests that the market depth may be inadequate, making it difficult to absorb large trading orders without causing significant price volatility, especially when facing potential sell-off pressure, which could render the market more fragile, lacking sufficient “fuel” to support sustained price increases.
Retail investor participation is low: Market breadth needs to be strengthened. Data analysis shows that the net buying volume among small investors (individual purchase amounts between $0 and $10,000) is currently still in negative territory (below 0%).
Although historically retail investors tend to gradually enter the market only after price trends are established, their widespread participation is crucial for solidifying upward trends and providing continuous buying momentum. The current absence of retail investors indicates that this round of increase may lack broad market foundational support, being more dominated by institutional or large traders. Once the attitudes of these dominant forces change, the market may be more prone to rapid declines without retail support.
Concerns about leverage-driven dynamics deepen: Risks of overheating in the futures market. Analysts and data from Glassnode indicate that the recent increase in Bitcoin prices is largely driven by leveraged trading in derivative markets (especially futures), rather than actual buying pressure from the spot market.
The explosive increase of $2.4 billion in Bitcoin futures open interest in less than 36 hours serves as clear evidence. Over-reliance on leverage-driven increases carries high risks, as it amplifies market volatility. A slight price pullback could trigger massive forced liquidations of leveraged long positions, leading to a chain reaction and causing sharp price declines.
A healthy upward trend requires confirmation and support from spot buying. Currently, the disparity between the fervor in the futures market and the relative calm in the spot market, if it continues to widen, will increase the risk of market corrections.
Whether Bitcoin can continue to rise in the future will depend on whether spot buying can keep pace, whether institutional interest remains, and whether the market can overcome the current resistance and potential vulnerabilities.
Reference: coindesk, cointelegraph, cointelegraph