Bitcoin spot demand has weakened sharply again recently, making the current price trend more fragile than it appears, an analysis showed. With the rebound relying more on derivatives markets and short covering than spot buying, the market needs to watch for further downside risk.

On July 20 (local time), blockchain outlet Decrypt reported that CryptoQuant contributor ScenarioX said bitcoin’s 30-day spot demand recovered to about minus 80,000 BTC in early July but has recently fallen again to near minus 170,000 BTC.

The key is a gap between price and demand. Bitcoin prices have been relatively stable in recent weeks, but the analysis said this has not been supported by strong spot buying. ScenarioX said recent price support has relied heavily on easing short-term selling pressure and short covering in derivatives markets rather than a recovery in spot demand. It said derivatives moves helped prevent a deeper drop, but it is difficult to sustain a long-term uptrend on futures-driven demand alone.

He assessed the current bitcoin market as being in a “structurally vulnerable state”. He warned that if selling by existing spot investors increases again while meaningful spot buying does not flow in, prices could face sharp downward pressure.

The analysis did not rule out the possibility of a short-term rebound. It said derivatives momentum could support a price bounce while spot selling remains limited. It added that rebounds led by leveraged positions are generally unstable. Without stronger spot demand, the current recovery could end with large-scale liquidations of long positions, and bullish bets could be unwound in a chain during a price decline.

Bitcoin prices are in fact moving within a narrow range. Based on CoinMarketCap, bitcoin was at one point trading at $63,941. It was down 1.2 percent over 24 hours but up 1.91 percent over the past 7 days. Gains over the past month were limited to 0.41 percent, and it is down about 27 percent from the start of the year. The price has not collapsed sharply, but the period is seen as one where no clear upward momentum is confirmed either.

Fund flows showed mixed signals. Market analytics firm Santiment said that as bitcoin regained the $64,000 level, U.S. spot bitcoin exchange-traded funds recorded net inflows of $264.4 million over the past 2 weeks. That suggests the long-running outflow trend seen in May and June has paused for now.

By product, Fidelity’s FBTC attracted about $166 million during the rebound in early July, while ARK Invest and 21Shares’ ARKB saw inflows of about $91.8 million. BlackRock’s IBIT also returned to net inflows, posting $138.9 million on a day when spot bitcoin ETFs as a whole recorded $181.1 million of inflows.

Santiment cited slowing U.S. inflation indicators, improved expectations for Federal Reserve policy, and optimism about the crypto regulatory environment as factors behind the recent recovery in ETF demand. It also said that the fact that some ETF funds have returned recently is not enough to conclude the full-year trend has changed.

Another CryptoQuant contributor, IT Tech, said the recent recovery should be seen within a bigger trend. He said spot bitcoin ETFs accumulated more than 500,000 BTC in net inflows in 2024 and attracted about 250,000 BTC even at the peak in 2025, but have recorded cumulative net outflows of about 120,000 BTC so far in 2026.

As ETF demand served as a key driver in past bitcoin bull markets, he said the net outflows continuing this year could remain a burden on prices unless other funding sources replace them.

Ultimately, the key issue in the current market is not the price itself but the quality of demand, the analysis said. If spot buying does not recover, a derivatives-driven rebound may lack staying power. While recent ETF inflows are supporting investor sentiment in the short term, the bitcoin market is likely to remain exposed to additional volatility as long as weaker spot demand and net ETF outflows on a yearly basis continue.