Bitcoin (BTC) has been facing a persistent downtrend, with the cryptocurrency hitting new local lows of under $59,000. The recent drop below $60,000 during the mid-hours of the United States Monday trading session marked a new local low of $58,500. This decline has been fueled by ongoing outflows from the U.S. spot Bitcoin exchange-traded fund (ETF) market.
The latest weekly report from the crypto exchange Bitfinex highlighted the significant outflows from U.S. spot Bitcoin ETFs, totaling over $100 million per trading day last week, resulting in a collective outflow of $544.1 million. Analysts at Bitfinex attributed these outflows to a mix of weak-handed ETF investors reacting to short-term negative news and basis/funding arbitrage unwinding due to negative funding rates.
As a sign of the unwinding of basis/funding arbitrage, there has been a notable 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 in the past week, contributing to an overall slump of more than $450 million across various trading platforms. This downturn has brought the total Bitcoin futures open interest down from its June 7 record high of $36.99 billion to $33.3 billion.
Analysts from Bitfinex have suggested that the heavy ETF outflows witnessed recently could indicate that Bitcoin is nearing a bottom. Historically, significant outflows from U.S. spot Bitcoin ETFs have often been associated with the formation of local price bottoms in BTC. For example, when BTC fell below $70,000 in early June, U.S. spot Bitcoin ETFs experienced seven consecutive days of net outflows, demonstrating the impact of price fluctuations on investors’ sentiment.
Despite the potential signals of a bottom, Bitfinex analysts have warned that market sentiment remains bearish. They have pointed out a weakness in the lower timeframe range (from one-minute to 15-minute charts) across various crypto assets, indicating ongoing uncertainty and volatility in the market. Investors are advised to closely monitor these trends for clues regarding potential reversals or stabilization points in the cryptocurrency market.
The recent downtrend in Bitcoin, coupled with substantial outflows from U.S. spot Bitcoin ETFs, suggests a challenging period for the cryptocurrency market. While there are indications of a possible price bottom, the overall sentiment remains cautious, and investors should exercise vigilance and stay informed about the evolving market conditions.
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