Bitcoin (BTC) has recently experienced a continued downtrend, hitting new local lows of under $59,000. This decrease in value has been particularly evident during the mid-hours of the United States Monday trading session, where BTC briefly dropped below $60,000 to reach a new local low of $58,500. The ongoing slump can be attributed to the outflows from the U.S. spot Bitcoin exchange-traded fund (ETF) market, which have persisted into the new week.
The latest weekly report from the crypto exchange Bitfinex shed some light on the situation. U.S. spot Bitcoin ETFs witnessed significant outflows of over $100 million each trading day last week, totaling $544.1 million in combined outflows. Analysts at Bitfinex suggested that these outflows are a result of weak-handed ETF investors reacting to short-term negative news, along with basis/funding arbitrage unwinding due to negative funding rates.
As a sign of the unwinding of basis/funding arbitrage, Bitcoin futures open interest on platforms like the Chicago Mercantile Exchange (CME) has witnessed a steep decline. The open interest on the CME alone fell by $220 million in the past week, while the aggregate open interest across other platforms slumped by over $450 million within the same period. This plunge has brought the total Bitcoin futures open interest down from its record high of $36.99 billion on June 7 to $33.3 billion.
Despite the ongoing downtrend, analysts from Bitfinex believe that Bitcoin may be nearing its bottom. They pointed out that heavy ETF outflows, like the ones currently being observed, often coincide with the formation of local bottoms. When BTC dropped below $70,000 in early June, U.S. spot Bitcoin ETFs experienced seven consecutive days of net outflows, showing the impact of sharp price movements on ETF investors’ sentiment.
While there is hope for a potential reversal, Bitfinex analysts have warned that market sentiment remains bearish. They highlighted a weakness in the lower timeframe range (one-minute to 15-minute charts) across various crypto assets, indicating a prevailing sense of pessimism.
The recent downtrend of Bitcoin has been influenced by a combination of factors, including outflows from the U.S. spot Bitcoin ETF market and basis/funding arbitrage unwinding. Despite the bearish market sentiment, there are indications that Bitcoin may be approaching a potential reversal, as historical patterns suggest that heavy ETF outflows often signal the formation of local bottoms. Investors should closely monitor these developments to gain insights into the future trajectory of Bitcoin’s price.
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