Bitcoin (BTC) experienced a slight correction on March 27, dropping to $68,430 after failing to break the $71,000 mark. Traders in the Bitcoin derivatives market have shown a decline in bullish sentiment over the past week, suggesting that the $69,000 level may not hold.
The inflows of Bitcoin spot ETFs will play a crucial role in determining the price of BTC. Despite a rally from $63,800 to $70,000 leading up to March 27, only $151 million in leveraged short positions were closed in the BTC futures markets. This indicates that bears remained cautious, despite the significant $888 million net withdrawal from U.S. Bitcoin spot ETFs last week.
On a positive note, Bitcoin has demonstrated resilience by recovering from a 17.6% drop from $73,757 to $60,795 without causing panic among spot ETF investors. However, some market observers believe that the high inflows into spot ETFs were the primary driver behind BTC reaching a new high before the Bitcoin halving in April. This highlights the importance for bulls to monitor these trends.
This week, there has been a reversal in spot ETF flows, with a total of $418 million in net inflows recorded on March 26. Importantly, this was not due to reduced outflows from Grayscale’s GBTC, indicating genuine institutional demand even as Bitcoin’s price remained just 4% below its peak. However, this does not guarantee professional traders that $69,000 will serve as a support level.
Analysts can determine the stance of whales and arbitrage desks by analyzing positions across spot, perpetual, and quarterly futures contracts. On Binance, the long-to-short ratio among professional traders was 1.50 on March 22, favoring long positions. This figure has slightly decreased to 1.42 currently. On OKX, the sentiment was much more bullish on March 22, with a long-to-short ratio of 3.22. However, this sentiment has since diminished, with the ratio currently at 1.49 in favor of longs. This indicates a notable reduction in optimism among top traders, despite the 9.5% price increase during the period, suggesting other factors may be dampening bullish sentiment.
Bitcoin’s performance may be impacted by global economic concerns and mixed market signals. Some analysts argue that the global economic downturn is affecting Bitcoin, especially after the S&P 500 index failed to maintain its all-time high on March 21. The uncertainty surrounding the U.S. Federal Reserve’s interest rate decisions for 2024 is causing investors to lose confidence. Rate cuts are generally seen as positive for risk-on assets like Bitcoin. However, according to the CME FedWatch Tool, there is only an 8% chance of a rate cut at the Federal Reserve’s May 1 meeting.
Analysts also caution that a Fed rate cut may signal troubles rather than prosperity. Concerns about the lack of earnings growth and the overemphasis on artificial intelligence are posing risks to the stock market. This may be reflected in the decrease in preference for leveraged long positions in Bitcoin, as traders anticipate a weaker U.S. dollar against scarce resources.
The reduced interest in leveraged BTC longs should not be a cause for alarm, nor does it signal that Bitcoin will trade below $69,000. It likely reflects broader economic recession concerns and external pressures, such as the charges against KuCoin exchange by the U.S. Justice Department and the European Parliament’s discussions on limiting cryptocurrency payments from self-hosted wallets.
Please note that this article does not provide investment advice or recommendations. It is important for readers to conduct their own research and make informed decisions when it comes to investments and trading.