The recent downtrend in Bitcoin (BTC) has shown no signs of improvement, with the cryptocurrency reaching new local lows of under $59,000. This decline was particularly notable during the mid-hours of the United States Monday trading session, as BTC briefly fell below $60,000 to hit a new low of $58,500. The persistence of this slump can be attributed to the outflows from the U.S. spot Bitcoin exchange-traded fund (ETF) market, which have continued into the new week.
The latest weekly report from the crypto exchange Bitfinex shed light on the situation, revealing that U.S. spot Bitcoin ETFs experienced losses of over $100 million each trading day last week. This amounted to a total of $544.1 million in outflows. Analysts at Bitfinex attributed these outflows to a combination of weak-handed ETF investors reacting to short-term negative news and basis/funding arbitrage unwinding due to negative funding rates.
Furthermore, Bitfinex pointed out that one of the indicators of unwinding basis/funding arbitrage is the significant decline in Bitcoin futures open interest on platforms like the Chicago Mercantile Exchange (CME). The open interest on the CME alone dropped by $220 million last week, while the overall aggregate open interest across other platforms decreased by over $450 million during the same period. This plunge has brought the total Bitcoin futures open interest down from a record high of $36.99 billion on June 7 to $33.3 billion.
Despite the bearish sentiment in the market, analysts at Bitfinex suggested that BTC could be nearing its bottom. Heavy ETF outflows, such as the ones currently being witnessed, often align with the formation of local bottoms. For instance, when BTC dipped below $70,000 in early June, U.S. spot Bitcoin ETFs experienced seven consecutive days of net outflows. This pattern serves as a crucial indicator for investors to monitor, as it can provide insights into potential reversals or stabilization points within the market.
While the current market sentiment remains bearish, with weaknesses observed in lower timeframe range charts for various crypto assets, there is still hope for a turnaround. As investors continue to navigate through the uncertainties in the market, it is essential to stay informed about the factors influencing the price movements of Bitcoin and other cryptocurrencies. By understanding the dynamics at play, investors can make more informed decisions and adapt their strategies accordingly.
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