Bitcoin Futures Indicate Bearish Trend Amid Muted Spot ETF Inflows and Rising Interest Rate Predictions
Summary:
On April 18, Bitcoin (BTC) futures saw a surge in the demand for short contracts, implying a potential bearish trend. The lack of inflows into spot Bitcoin ETFs and expectations of rising U.S. interest rates influenced this shift in market sentiment. Bitcoin's funding rate turned bearish for the first time in six months. With increased volatility and hefty liquidations, market data suggests that Bitcoin bulls might have stepped back from leveraging, reflecting a change in market sentiment. Despite a brief dip in prices, data doesn't suggest an imminent price correction or worsening conditions.
April 18 saw a noticeable upswing in short contract demands for Bitcoin (BTC) futures, hinting at potential downward trends. This wave was primarily attributed to the enduring dearth of spot Bitcoin ETF inflows and heightened U.S. interest rates predictions, both of which boosted unfavorable market views. Bitcoin's financing rate, after a six-month positive streak, encountered a bear turn.
It's common practice for retail investors to tilt towards perpetual futures due to their close alignment with the standard spot market's price dynamics. To preserve level risk exposure, every eight hours, a fee, known as the funding rate, is applied by exchanges. It veers towards the positive when buyers crave more leverage and negative when sellers pursue extra leverage. Neutral funding rate typically stands around 0.025 for every eight-hour cycle or 0.5% weekly. Though a rarity, negative rates are deemed as strong bearish signs.
Bitcoin's funding rate took a switch towards the negative on April 15 and followed suit on April 18, pointing towards a dip in long position desires and marking the lowest figures in over half a year. Market mood swings usually become apparent after major price shifts, such as the 13.5% plunge in Bitcoin's value from April 12 to April 18.
Market patterns frequently illustrate that high impact results when bear confidence begins to strengthen. Some market experts see the $72,000 double-top pattern as a warning of a possible continued downward trajectory until June.
The revelation that the U.S. recorded higher-than-anticipated inflation and robust retail sales quickly eased investors' risk concerns. The Consumer Price Index surged by 3.8% yearly in March, surpassing the Fed’s 2% threshold, and retail sales also got a 0.7% year-to-year boost. A flourishing economy minimizes the chances of Federal Reserve lowering interest rates, making fixed-income investments more appealing. Reuters highlighted that a resilient labor market continues to drive consumer spending despite financial stress vulnerabilities among households with lower incomes.
Farside Investors noted that April 17 saw a net outflow of $165 million from spot Bitcoin ETFs, making it the fourth consecutive day of withdrawals. This is a dramatic shift from early April, when Bitcoin ETFs roped in $484 million despite Grayscale GBTC fund's constant outflows.
The data throws light on the likelihood of Bitcoin bulls pulling back from leveraging, following a high optimism epoch. In March 2024, there were seven instances where the funding rate crossed the 1.2% weekly mark. This sparked days of high volatility, leading to heavy 48-hour liquidations noticed on March 5, March 16, and March 19. The volatility clearly affected the bull's enthusiasm, especially since Bitcoin's rate skyrocketed by 12.3% in March. Despite getting future movements right, these unexpected price swings resulted in margin deposit depletion and enforced liquidations.
For further insights into market mood, traders are advised to keep an eye on Bitcoin options markets as increased demand for put options typically signals neutrality to bearish price strategies.
Recent data shows an over 35% call option to put option rise over the previous week. Right now, there's no clear evidence from Bitcoin futures and options markets that suggests a looming price correction or worsening conditions. If anything, the data shows that the short-lived plunge below $60,000 on April 17 was not severe enough to sustain long-term bearish views.
Please note this article is devoid of investment advice or recommendations. Every investment or trading move involves risk and readers must conduct thorough research before deciding.
Published At
4/19/2024 1:11:00 AM
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