Bitcoin (BTC)’s rising funding rate and aggregated open interest suggest bullish investors are opening longs in an attempt to defend the lows of the range and important support at $70,000, but another day of spot ETF outflows has investors worried that institutional sentiment on BTC is changing.
As shown in the chart below, open interest in Bitcoin remains relatively stable despite the daily selloff, further supporting the view that long positions are either replenishment remain open or newly created. Cross-exchange funding rates (the last indicator at the bottom of the chart) are also broadly positive to neutral, indicating a long-term bias among investors.
BTC/USDT hourly chart. Source: Velo.xyz
Before the drop to $73,000, liquidations remained within the norms of BTC’s intraday percentage range, suggesting that this week’s price action is a continuation of the current consolidation rather than an early confirmation of a trend reversal on a higher time frame.
One important point to consider is “who” is backing BTC. Hyblock’s True Retail Longs & Shorts Accounts indicator shows that retail investors are increasingly viewing corrections as opportunities to buy low.
Hyblock analysts said yes
“Long exposure is now near 62%, a level at which retail traders have historically been vulnerable to being trapped. Over the past three months, 15-minute backchecked data shows that when retail long positioning was above 62%, BTC posted positive returns 82% of the time seven days later, with a median forward return of 3.6% across 1,459 cases.”
7-day future price change of actual retail long and short bills %. Source: Hyblock
Related: Bitcoin Miner Inflows to Binance Rise as BTC Struggles to Maintain Uptrend: Is $70K Next?
ETF outflows, negative Coinbase premium dampen efforts of spot and perp traders
According to Bitfinex analysts, Bitcoin investors are “going cautiously on Thursday’s (May 29) personal consumption expenditures (PCE) report for April.”
Analysts he said,
“Since May 15, open interest in futures contracts (OI) has fallen sharply following a price correction that sent BTC down more than 10 percent from recent highs above $82,000. Aggregate global OI for Bitcoin has now fallen back below $55 billion, the lowest reading since April 11, and is down 14 percent from when BTC was trading above 80,000 dollars.”
On Wednesday, outflows from spot Bitcoin ETFs exceeded $200 million, while cumulative outflows over the past 7 days exceeded $1.5 billion. Along with the reversal in ETF flows, Bitfinex pointed to Coinbase’s negative premium as a “significant warning sign.”
Spot Bitcoin ETF Weekly Flows. Source: SoSoValue.com
“In the post-ETF landscape, this reflects a structural reality: direct spot demand in the US on Coinbase has largely been replaced by indirect institutional demand through ETFs, structured products and over-the-counters.”
Analysts noted that even though the price of Bitcoin “is in an uptrend on lower time frames than the breakout” of $72,000, “there is no possibility of continuation.”
“A strong uptrend is usually initiated via the spot bar, which would mean persistently negative funding rates and a persistently positive Coinbase premium. Right now, the opposite is the case.”
