Bitcoin rallied in October—we asked Sonar what happened in spot markets

Alex Mologoko
Nov 6, 2023

In this post, we’re kicking off a series of data insights using our new product, Sonar.

Today we’ll explore what was happening in Bitcoin spot markets in the last month amid Blackrock ETF approval speculation and Grayscale Bitcoin Trust ETF conversion hopes. 

In October, the price of Bitcoin surged more than 28%, briefly topping $35,000, a price level not seen since May 2022. Using Sonar, I wanted to see what might or might not be driving this recent move. Was it retail speculation? Anticipation of a new Bitcoin ETF? Something else? 

Let’s start by looking at volumes on centralized exchanges (CEX).

CEX volume analysis

If there was any material spot BTC accumulation on an exchange, we would expect exchange Bitcoin balances to decline significantly, with outflows exceeding inflows by a large margin. What we see in Sonar is exchange balances barely changing, with some decreasing and some declining, but being flat on average. 

Notably, Bybit balance has increased, which could be interpreted as an increase in high-leverage speculation with Bitcoin derivatives.

Bybit volume analysis

The next figure will help us make sense of the decline in CashApp balance, which is usually associated with retail trader activity.

CashApp volume analysis
CEX inflow and outflow analysis

There was a 5,800 Bitcoin net outflow from CashApp to Binance. It’s difficult to say with 100% confidence what the most likely explanation for this change would be. My guess is retail users on CashApp (who can only buy BTC), cashed in their gains and transferred capital to Binance so they could parlay their wins and roll the dice with other altcoins. 

On the other hand, Robinhood, another major retail platform, seems to be bleeding its Bitcoin balances mostly to institutions based on the Sonar visualization of net flows above.

Our conclusion is that October Bitcoin price action has been driven mostly by speculation and derivatives action, with signs of strong spot accumulation missing. The bulk of Bitcoin price run up has been driven by a series of cascading leveraged short liquidations in derivatives markets, which culminated on Oct 23.

We hope you enjoyed this blog post and found it helpful in understanding the latest trends in the Bitcoin space. We will continue to publish more data insights using Sonar in the coming weeks and months. Stay tuned!