Is Bitcoin’s supply squeeze signaling the start of a new rally?

• Spot market demand leads Bitcoin’s upward momentum.
• BTC has declined by 2.46% over the past 24 hours.

Over the past month, Bitcoin [BTC] has experienced a sustained uptrend, hitting a new ATH of $108268.

This uptrend has left key stakeholders deliberating over factors behind it. Inasmuch, CryptoQuant analysts have cited growing spot market demand as the major factor pushing BTC’s prices up.

Bitcoin’s spot market demand soars

In his analysis, Avocado on-chain posited that Bitcoin’s bull cycle is either driven by the Futures market or the spot market.

As such, the 2023 bull run was driven by the Futures market followed by a spike in spot market activity, thus driving prices up.

Source: CryptoQuant

However, the spot and Futures market saw a prolonged decline from March 2024 to September. In October 2024, Bitcoin saw a rise in trading volumes for both markets, which has since driven prices up to new ATH.

While Futures market demand has declined over the past month, spot market demand continues to increase.

This surge in spot market demand suggests that speculative excess in the Futures market is cooling, while buying pressure in the spot market is gaining momentum.

Therefore, Futures markets will continue to experience a cycle of liquidations and overheating, thus resulting in BTC’s price growth. As such, this price movement will encourage further capital inflows into the spot market.

Often, a surge in spot market demand pushes an asset’s price up through a higher buying pressure.

Impact on BTC

Usually, a rise in buying pressure leads to higher prices. However, Bitcoin has experienced a market correction over the past day.

In fact, as of this writing, Bitcoin was trading at $103825, a 2.46% decline in daily charts. Despite the dip, the market is continually experiencing higher demand, especially in the spot market.

Source: CryptoQuant

This surge in spot market demand is evident through the decline in fund flow ratio. Notably, users are withdrawing funds from exchanges and holding them in private wallets.

This is a bullish signal showing reduced exchange activity, which correlates with long-term market confidence.

Source: CryptoQuant

Additionally, Bitcoin’s stock-to-flow ratio has spiked to 46.5k after declining to 37k. A surge in SFR suggests a spike in BTC scarcity.

This shows that the supply of the assets is reducing while the demand increases. When demand rises amidst rising scarcity, it causes a supply squeeze, thus driving prices up.

Read Bitcoin Price Prediction 2024–2025

Simply put, a surge in Bitcoin’s spot market demand positions the crypto for more gains on its price charts through a higher buying pressure. Therefore, if this demand continues, prices will continue rising.

If so, we could see BTC reclaim $106,000 and push towards a new high. Subsequently, if the correction witnessed over the past day persists, the king coin will decline to $102630 before another uptrend.