Bitcoin spot ETF inflows top $900M in six days, but recovery risks remain
The Bitcoin Coinbase Premium Gap has been negative since the 6th of May, the highest level of pessimism in two years.
Bitcoin [BTC] spot ETF net flows have measured a cumulative $930.39 million since July 14. Data from SoSoValue showed that the BTC spot ETFs have seen net inflows since the 14th of the month.
It was the first time since May that the inflows streak was maintained for over five successive days.
Pessimism reigns supreme despite ETF flow shift
Technical indicators flashed a long-term buy signal for Bitcoin. Yet, liquidity posed a serious challenge to any attempt at recovery, AMBCrypto reported.
A price breakout without fresh liquidity in the form of stablecoin netflows was not indicative of a macro bottom for BTC.
Crypto analyst Darkfost observed that the Coinbase Premium Gap has been negative since the 6th of May. This represented the highest level of pessimism in two years.
Coinbase premium refers to the difference in Bitcoin prices between Coinbase Advanced, where institutions and professionals trade, and Binance, which is retail-dominated.
A negative trend implies steady selling pressure from smart money, despite the attempted rallies toward $70k over the past month.
The analyst concluded that investors would choose to limit risk when macroeconomic or geopolitical factors were unstable, as they have been in recent months.
Leverage is gradually leaving the Bitcoin market
The price of Bitcoin has gradually been rising since July 1, when the price reached a swing low of $57,800. The gains since then have been accompanied by a decline in realized volatility.
Crypto analyst Axel Adler Jr. used the 1-week realized volatility, smoothed by the 30DMA, compared to Bitcoin’s price and its 200DMA.
Since 2016, 92% of trading days have seen higher realized volatility than the current levels.
The falling realized volatility alongside rising prices meant that the most recent price bounce came without any sharp price swings.
The Open Interest to market capitalization ratio measures if the derivatives share is rising or falling compared to price trends. It shifted negatively in early July and has been negative for 21 consecutive days.
The decline suggests derivatives leverage has continued falling even as Bitcoin recovered, reducing the immediate risk of a large liquidation-driven move. Compared to a month ago, the threat of a liquidation cascade was lower due to these factors.
The analyst concluded that the market is in a low-activity phase. A sustained price move beyond $66k-$72k, alongside further derivatives reduction, is needed to give a major signal of market recovery.
Final Summary
- Bitcoin ETF inflows were improving, and its realized volatility was falling.
- The derivatives leverage was in decline as prices advanced higher, but a breach of $66k-$72k is needed to majorly reduce the threat of further bearishness in the long-term.
