Bitcoin’s Venezuela hedge is winning – But BTC may pay the price IF…

Market makers are calling the recent strike on Venezuela bullish for crypto. 

At first glance, that might sound like a stretch. However, when you look at how capital has been rotating into risk assets, the argument starts to make sense.

So far, the Total Market Cap has been up 7%, showing a solid $250 billion inflow.

That said, it’s not just about the technicals. 

More importantly, the “timing” strengthens the bull case. Unlike prolonged conflicts that typically push capital into legacy assets, this bout of FUD was short-lived. As a result, capital rotated back into Bitcoin [BTC].

The result? Bitcoin is seeing close to 2× the capital inflows of gold (XAU).

Meanwhile, the oil narrative looks similar. Any real supply impact from Venezuela would take months to reach U.S. markets. Because of that, capital flows into oil remain capped, with gains running 2× lower than BTC.

In short, Bitcoin is acting as the preferred hedge amid current macro FUD.

That said, skeptics have questioned this “Venezuela-driven” rally, arguing it lacks the fundamentals for a sustained move. That puts on-chain data in focus. If a divergence emerges, is this just another “sell-the-news” move?

Bitcoin gains face headwinds from low spot volume

From a liquidity standpoint, Bitcoin showed a clear divergence.

On the Derivatives side, a recent $450 million short liquidation wiped out bets on the downside after the strike. As a result, BTC reclaimed $94k, triggering the biggest short liquidity sweep in over a month.

Consequently, speculative capital is now building. Bitcoin’s Open Interest (OI) jumped about $3 billion in a single day.

What’s more, this brought total OI to nearly $62 billion, returning it to late-November levels.

In this context, Glassnode’s recent report flashes caution.

Looking closer, Bitcoin’s Aggregate Spot Volume, at around $10 billion, has printed its lowest level since November 2023. As a result, the report highlighted this as a “sharp contrast” with the current upside in the market.

Because of this, the needle tilts toward skeptics.

With BTC’s on-chain liquidity thin, sell-the-news concerns make sense. Hence, the rally is shaping up like a hype cycle, lacking the momentum to push past $100k, leaving the market exposed to a possible long squeeze.

Final Thoughts

• The short-lived Venezuela FUD pushed $250 billion into crypto, with BTC seeing nearly 2× the inflows of gold, while oil gains remain capped.
• Despite the rally, on-chain metrics show low spot volume and leveraged positions, suggesting a potential “sell-the-news” move and higher volatility.