As risk assets in the financial sector face vulnerability, market experts have warned that bitcoin (BTC) could also be pushed into a “slow bleed environment” due to certain economic factors. Recent concerns about United States authorities not cutting interest rates soon have left risk assets, including BTC, looking shaky. The release of stronger-than-expected jobs data caused a dent in these assets, but BTC managed to navigate this impact gracefully.
One significant factor that has helped support bitcoin’s price amid these uncertainties is the ongoing inflows into the U.S. spot Bitcoin exchange-traded funds (ETF) market. Since May 13, there has been a continuous 19-day streak of inflows, providing crucial support for bitcoin’s price. However, this streak was broken recently, raising concerns about the future impact on bitcoin.
Analysts are closely watching for inflation signals that may emerge after the U.S. Consumer Price Index report and the upcoming U.S. Federal Open Market Committee meeting on interest rates. These near-term economic signals could disrupt the trend of ETF inflows and potentially push BTC into a ranging or slow bleed environment, according to Bitfinex.
Currently, funding rates in bitcoin perpetual futures markets are high, suggesting that traders are willing to pay a premium to open long positions. This, coupled with the rising bitcoin CME futures open interest (OI) and ETF inflows, indicates that traders are taking advantage of arbitrage opportunities between futures and spot markets. Despite the recent price correction, OI remains at a high level above $36 billion.
BTC experienced a significant plunge recently, wiping out many leveraged long positions on altcoins and neutralizing funding rates. Although positive ETF flows have helped alleviate some pressure on BTC, the asset has been unable to surpass its range high. This failure to break past range highs, despite reaching over $71,500, remains a cause for concern.
While immediate major declines are not expected, the ongoing economic uncertainties and the struggle to break range highs present challenges for bitcoin. The interplay of various economic factors, including inflation signals and interest rate decisions, will continue to shape bitcoin’s trajectory in the coming days. Investors and traders alike will need to closely monitor these factors to navigate the evolving landscape of the cryptocurrency market.
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