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Bitcoin’s $66K Rally May Not Last, Says CryptoQuant: Here’s Why
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Bitcoin’s $66K Rally May Not Last, Says CryptoQuant: Here’s Why

By Samuel —

Bitcoin surged past $66K on rising leverage, not real spot demand, as CryptoQuant flags thin volume behind the fragile price gain.

Bitcoin climbed from roughly $64,000 to $66,000 within two days, but the rebound may not stand on firm ground. CryptoQuant analyst Sunny Mom says the move looks more like a leverage-driven squeeze than a return of real buying interest. 

Open interest jumped from about $21.2 billion to a fresh high of $23 billion as price rose, pointing to fresh leveraged bets rather than short covering alone. Spot volume, meanwhile, has stayed in a cooling phase since April.

At press time, Bitcoin traded at $65,725.07. The asset is down 0.95% over the past day but still up 1.89% for the week, according to CoinGecko.

Leverage Drives Bitcoin Toward $66K

Funding rates briefly turned negative on July 18 and 19 as bearish traders got squeezed out of their positions. That squeeze lit the initial spark for the rebound toward $66,000. 

Open interest kept climbing alongside price during the move, a signal that traders opened new leveraged positions instead of simply closing short bets. 

Funding remains moderate rather than overheated, according to CryptoQuant data, suggesting the market has not yet reached extreme conditions. Futures volume sits in neutral territory, showing no unusual spike tied to the rally.

Spot Demand Stays Cool Despite the Rally

Spot buying has not shown up to support the climb toward $66,000.

CryptoQuant data places spot volume in cooling mode, a trend that has held steady since April. This pattern points to derivatives traders amplifying volatility rather than genuine spot side demand pushing prices higher. 

Exchange stablecoin netflows turned negative during the period, though total stablecoin market cap has only slowed rather than dropped sharply. Capital appears to be stepping off exchanges to watch price action rather than exiting crypto altogether. 

U.S. spot Bitcoin ETFs posted a second consecutive week of inflows, with about $271 million entering funds on July 20 alone. 

BlackRock’s IBIT led that day with $116.5 million, a sign institutional buyers are trickling back in slowly. Even so, ETF inflows have not been large enough to pull spot volume out of its cooling trend.

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Traders Watch for a Reversal Before FOMC

Trader Astronomer opened a countertrend short position after Bitcoin hit the $66,000 level, citing a pattern tied to Federal Reserve meetings. 

The trader pointed to what has been called the FOMC reversal, where price tends to shift direction days before the meeting rather than during or after it. 

Astronomer says this pattern has played out with more than 90% accuracy in past cycles, with the next Fed meeting set for July 29. The trader described the setup as one piece of a broader plan built on several confluences rather than a signal used alone. 

Market participants often exit positions right before major Fed announcements, expecting a large move. That behavior has historically lined up with the reversal pattern taking hold early.

Bitcoin’s push past $66,000 combined a short squeeze with rising leverage and a slow trickle of institutional ETF demand. Spot volume has yet to confirm the move, leaving the rally without the broad participation that typically signals lasting strength. 

CryptoQuant’s Sunny Mom notes the setup has not reached overheated territory. It also lacks solid footing, with a sharp correction possible once leveraged positions unwind. 

Traders will watch spot volume closely in the days ahead, along with how price behaves heading into the July 29 Fed meeting.

Samuel

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Samuel

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