Recent developments regarding Venezuela are being viewed as positive for Bitcoin as market makers interpret the situation as bullish for cryptocurrencies. Initially, this assertion may seem questionable, but an analysis of capital movement into risk assets supports this perspective. The overall cryptocurrency market cap has increased by 7%, reflecting an influx of $250 billion. This trend is not merely a technical phenomenon; the timing of the situation adds weight to the bullish narrative. Unlike extended conflicts that typically prompt investors to seek refuge in traditional assets, the current wave of fear, uncertainty, and doubt (FUD) has been relatively brief, allowing funds to flow back into Bitcoin (BTC).
This shift has resulted in Bitcoin attracting nearly double the capital inflows compared to gold (XAU). The oil market mirrors this trend, with any tangible impact from Venezuelan supply disruptions expected to take months to affect U.S. markets. Consequently, capital flow into oil remains limited, with gains significantly trailing those of Bitcoin.
However, skepticism surrounds this so-called “Venezuela-driven” rally, as critics argue it lacks the necessary fundamentals for a robust upward trend. This situation brings on-chain data into sharper focus, raising questions about whether this rally is merely a case of “sell-the-news.”
From a liquidity perspective, Bitcoin is exhibiting a notable divergence. A recent short liquidation of $450 million on the derivatives side obliterated bearish bets following the Venezuelan strike, enabling BTC to regain the $94,000 mark and triggering one of the largest short liquidity sweeps in over a month. As a result, speculative capital is beginning to accumulate, with Bitcoin“s Open Interest (OI) surging by about $3 billion within a single day, bringing the total OI to nearly $62 billion—levels not seen since late November.
In this context, a recent report from Glassnode raises concerns. Bitcoin”s Aggregate Spot Volume stands at around $10 billion, marking its lowest level since November 2023. This disparity presents a “sharp contrast” to the current upward market trend, indicating that the bears may have valid points. With liquidity in Bitcoin remaining thin, fears of a sell-the-news scenario are warranted, leading to speculation that this rally may resemble a hype cycle without sufficient momentum to surpass the $100,000 threshold, leaving the market vulnerable to a potential long squeeze.
As the situation unfolds, it remains critical for investors and market participants to monitor these dynamics closely, as they could significantly influence the trajectory of Bitcoin and the broader cryptocurrency landscape.
