Market makers call the recent attack on Venezuela bullish for crypto.
At first glance that may sound like a caress. However, when you look at the way capital has been converted into risky assets, the argument starts to make sense.
Year to date, the total market cap is up 7%, showing solid inflows of $250 billion.
That said, it’s not just about the technology.
More importantly, the ‘timing’ reinforces the bull case. Unlike long-term conflicts where capital is typically invested in old assets, this period of FUD was short-lived. As a result, capital returned to Bitcoin [BTC].
Source: TradingView (BTC/USDT)
The result? Bitcoin sees almost twice as much capital inflow as gold (XAU).
Meanwhile, the oil story looks similar. It would take months for a real supply impact from Venezuela to reach US markets. Therefore, capital flows into oil remain limited, with profits being 2x lower than BTC.
In short, Bitcoin is acting as the preferred hedge amid the current macro FUD.
That said, skeptics have wondered this “Venezuela-driven” rally, arguing that the foundations for a sustainable movement are lacking. This puts on-chain data at the center. If a disagreement arises, is this just another sell-the-news move?
Bitcoin gains face headwinds from low spot volume
From a liquidity perspective, Bitcoin showed a clear difference.
On the derivatives side: recently $450 million short liquidation bets on the negative side wiped out after the strike. As a result, BTC recovered $94,000, leading to the largest short liquidity action in more than a month.
As a result, speculative capital is now building up. Bitcoin’s Open Interest (OI) jumped about $3 billion in one day.
Furthermore, this brought the total OI to almost $62 billionto the level at the end of November.
Source: Glassnode
In this context, Glassnode’s recent report calls for caution.
A closer look shows that Bitcoin’s total spot volume, at around $10 billion, has reached its lowest level since November 2023. report highlighted this as a “sharp contrast” to the current upward trend in the market.
This tips the needle towards skeptics.
With on-chain liquidity in BTC scarce, concerns about selling the news are logical. Therefore, the rally is starting to develop as a hype cycle. the momentum is lacking to get past $100,000, exposing the market to a potential long squeeze.
Final thoughts
- The short-lived Venezuela FUD has pumped $250 billion into crypto, with BTC nearly doubling gold inflows, while oil profits remain muted.
- Despite the rally, on-chain metrics show low spot volume and leveraged positions, indicating a potential sell-the-news move and higher volatility.