Bitcoin (BTC) has seen a significant downtrend, with the price dropping to below $59,000, reaching a new local low of $58,500. This decline has been attributed to outflows from the U.S. spot Bitcoin exchange-traded fund (ETF) market, which have continued into the new week. According to the latest weekly report from Bitfinex, U.S. spot Bitcoin ETFs experienced over $100 million in outflows each trading day last week, totaling $544.1 million in collective outflows. Analysts believe that these outflows are a result of weak-handed ETF investors reacting to short-term negative news, as well as basis/funding arbitrage unwinding due to negative funding rates.
The decline in Bitcoin futures open interest on the Chicago Mercantile Exchange (CME) and other trading platforms is seen as a sign of unwinding of basis/funding arbitrage. The open interest on the CME dropped by $220 million in the past week, while the overall aggregate open interest across other platforms slumped by more than $450 million. This has brought the total Bitcoin futures open interest down from a record high of $36.99 billion on June 7 to $33.3 billion. Analysts believe that this reduction in open interest, negative funding rates, and ETF outflows indicate a substantial unwinding of funding arbitrage trades linked to ETF flows.
Despite the current downward trend, analysts at Bitfinex suggest that Bitcoin could be nearing its bottom. They predict that heavy ETF outflows, like those being observed, often correlate with the formation of local bottoms. When BTC dropped below $70,000 in early June, U.S. spot Bitcoin ETFs recorded seven consecutive days of net outflows, showing the impact of sharp price movements on ETF investors’ sentiment. This pattern is considered crucial for investors to monitor as it can provide clues to potential reversals or stabilization points within the market.
While there may be signs that Bitcoin is nearing its bottom, Bitfinex analysts warn that market sentiment remains bearish. They point out a weakness in the lower timeframe range, particularly on one-minute to 15-minute charts, across various crypto assets. Investors are advised to remain cautious and closely monitor market developments to make informed decisions. The ongoing outflows from U.S. spot Bitcoin ETFs and the decline in open interest in Bitcoin futures could continue to have an impact on the market in the coming days. As the situation evolves, it is essential for traders and investors to stay updated and adapt their strategies accordingly to navigate the volatile market conditions.