Bitcoin futures contracts on April 18 showed a surge in demand for short positions, leading to speculation of further bearish momentum. This trend was influenced by the lack of inflows into spot Bitcoin exchange-traded funds (ETFs) and expectations of rising interest rates in the U.S., all contributing to a negative market sentiment.
The funding rate for Bitcoin perpetual futures, which mirrors the price movements of regular spot markets, turned negative on April 15 and again on April 18. This marked the lowest levels in over six months and indicated a reduced appetite for long positions. The shift in market sentiment became evident after a significant 13.5% decrease in Bitcoin’s price between April 12 and April 18.
Market dynamics suggest that the strongest impacts occur when confidence among bears intensifies. Some analysts interpret the $72,000 double-top formation as a sign that the downtrend could persist until June.
From a broader economic perspective, recent data in the U.S. showing stronger-than-expected inflation and robust retail sales have reduced investors’ aversion to risk. The Consumer Price Index rose 3.8% annually in March, well above the Fed’s 2% target, with retail sales also up by 0.7% year-over-year. A thriving economy lessens the likelihood of the Federal Reserve reducing interest rates, which tends to favor fixed-income investments.
According to Farside Investors, there was a $165 million net outflow from spot Bitcoin ETFs on April 17, marking the fourth consecutive day of withdrawals. This contrasts with early April when these ETFs attracted $484 million despite ongoing outflows from the Grayscale GBTC fund. Data suggests that Bitcoin bulls might have retreated from leveraging after a period of heightened optimism.
For a deeper understanding of market sentiment, traders are advised to also observe the Bitcoin options markets, where a growing demand for put options typically signals a focus on neutral-to-bearish price strategies. Recent data indicates that the demand for call options has exceeded that for put options by 35% over the past week. This suggests that there is currently no evidence in the Bitcoin futures and options markets to suggest an imminent price correction or deteriorating conditions.
It’s important to note that this article does not contain investment advice or recommendations, and readers should conduct their own research before making any decisions.