Bitcoin (BTC) has been facing a continuous downtrend, with the cryptocurrency dropping to new local lows of under $59,000. This recent decline was particularly notable during the mid-hours of the United States Monday trading session, when BTC briefly slipped below $60,000 to hit a new low of $58,500.
One of the significant factors contributing to the ongoing slump in Bitcoin’s price is the outflows from the U.S. spot Bitcoin exchange-traded fund (ETF) market. According to the latest weekly report from the crypto exchange Bitfinex, U.S. spot Bitcoin ETFs experienced collective outflows of $544.1 million last week. This outflow is primarily attributed to weak-handed ETF investors reacting to short-term negative news and basis/funding arbitrage unwinding due to negative funding rates.
Bitfinex analysts noted that the unwinding of basis/funding arbitrage trades is evident in the steep decline in Bitcoin futures open interest on platforms like the Chicago Mercantile Exchange (CME). As per the report, the open interest on the CME fell by $220 million in the past week, contributing to an overall aggregate open interest drop of more than $450 million across various platforms. This plunge has reduced the total Bitcoin futures open interest from a record high of $36.99 billion to $33.3 billion.
Despite the bearish sentiment prevailing in the market, analysts at Bitfinex suggested that Bitcoin may be approaching a bottom. They pointed out that heavy ETF outflows, similar to those observed recently, often signal the formation of local price bottoms. The report highlighted the importance of monitoring patterns in ETF flows to identify potential market reversals or stabilization points.
However, Bitfinex analysts cautioned that overall market sentiment remains bearish, particularly evident in the weakness observed in lower timeframe range charts (ranging from one-minute to 15-minute charts) across various cryptocurrency assets. This persistent bearish sentiment suggests that investors should exercise caution and closely monitor market developments to navigate the current volatile market conditions.
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