According to CryptoQuant’s latest report, the recent spike in Bitcoin prices was primarily driven by increased demand from U.S. investors. Last Friday, Bitcoin’s price surged by over 6%, reaching $65,000—its highest since August 2—following Federal Reserve Chairman Jerome Powell’s remarks indicating a potential phase of lower interest rates.
The rally coincided with a decline in U.S. government bond yields, which fell to their lowest levels since March 2023, further boosting market enthusiasm.
Increased Bitcoin Flow to Coinbase
The report highlights that this price surge is largely attributed to heightened demand from U.S. investors. Evidence of this is seen in the Bitcoin price premium on Coinbase, a major cryptocurrency exchange, which has risen to its highest point since July. This premium suggests that U.S. investors are willing to pay more for Bitcoin compared to the global average, indicating strong local demand.
Moreover, Bitcoin is flowing back into Coinbase from non-U.S. exchanges—a trend historically associated with rising prices. This shift suggests that U.S. investors are increasingly active in the market, aiming to benefit from anticipated changes in monetary policy.
Fed’s Rate Cut Expectations and Market Reactions
Arthur Hayes, co-founder of Bitmex, argues in a recent blog post that the market’s positive reaction to the Fed’s commitment to rate cuts is justified. Investors anticipate that lower interest rates will boost assets priced in fiat currencies. Hayes notes, however, that anticipated rate cuts by the Fed, Bank of England (BOE), and European Central Bank (ECB) might reduce the interest rate differential between these currencies and the yen, potentially causing disruptions if central bank balance sheets are not expanded.
Hayes points out that the Fed’s announcement led to increases in risky assets like the S&P 500, gold, and Bitcoin, while the U.S. dollar weakened.
Perpetual Futures Market Shows Growth
The surge in demand is not limited to the spot market. The perpetual futures market has also seen a notable increase, with Total Open Interest—representing the number of outstanding derivative contracts—rising by nearly 10,000 Bitcoin since Powell’s announcement. This brings the Total Open Interest to 276,000 Bitcoin, indicating growing interest in futures contracts.
Overall Demand Trends and Future Outlook
Despite these positive signals, CryptoQuant reports that overall Bitcoin demand remains relatively weak. Demand growth has been sluggish and even turned negative in recent weeks, contrasting sharply with the stronger demand observed earlier in the year when Bitcoin was trading at $70,000.
The current demand levels suggest that while U.S. investors are driving short-term price movements, a more sustained and widespread increase in demand is needed for Bitcoin to fully recover and reach new highs.
