Bitcoin has recently fallen below key cost-basis models, indicating a decline in spot demand and ETF flows, according to the latest report. This shift reflects a wider market trend as derivatives markets exhibit signs of heightened caution, characterized by declining open interest and cycle-low funding rates. The cryptocurrency giant, Bitcoin, has faced challenges in sustaining its previous price levels, dipping below $97,000 and momentarily reaching $89,000. This sets a new local low, dragging its year-to-date performance into the red. The $95,000 to $97,000 range has emerged as a significant resistance level, and a successful reclaim could signal a possible market recovery.
The recent decline of Bitcoin beneath its short-term holder cost basis has triggered a wave of panic selling among investors. The 7-day EMA of realized losses has skyrocketed to $523 million daily, marking the highest level since the FTX collapse. The current selling pressure underscores the fragility of the market, as a considerable number of recent buyers are now experiencing losses. If Bitcoin cannot maintain the active investors’ realized price of around $88,600, it may indicate a continuation of bearish momentum, possibly resulting in a more significant market correction.
The derivatives market is exhibiting a sense of caution as well. Futures open interest has seen a decline, signaling a decrease in speculative activity. Market participants are demonstrating a cautious stance as traders opt to unwind risk instead of increasing their exposure. Implied volatility in the options market has surged, indicating a heightened appetite for downside protection. The skew continues to show a negative trend, as traders are willing to pay premiums for puts, signaling a defensive positioning strategy.
US spot ETF flows continue to show a negative trend, underscoring the absence of interest from conventional financial investors. The lack of ETF inflows indicates that a crucial source of demand remains dormant, putting the market at risk of additional downward pressure. The prevailing market sentiment seems to be one of caution, favoring protective measures rather than speculative investments. As traders brace for possible volatility, the trajectory of the market hinges on whether demand can stabilize at crucial levels or if the existing fragility pushes us into a more profound bear market.