Retail Interest Declines
Bitcoin’s demand from retail investors is at a three-year low. The focus has shifted to spot ETFs in the U.S. Net inflow reached $17.5 billion in July. However, careful evaluation is necessary. In Q1, institutional investors contributed half of the inflows to new crypto funds. Hedge funds like Millennium Management invested over $2 billion.
Hedge Funds’ Strategy
Hedge funds’ Bitcoin purchases aren’t pure investments. Their strategy involves buying Bitcoin on the spot market and selling an equal amount on the futures market for a premium. Currently, they hold $6.6 billion in short positions on the Chicago Mercantile Exchange.
Network Metrics Matter
To gauge real Bitcoin demand, consider network metrics. Retail demand, measured by 30-day transaction volume changes for transactions under $10,000, is at a three-year low. This aligns with the declining spot trading volume, which fell to $1.3 trillion in June.
Potential for Correction
This situation opens the door for potential corrections if negative factors emerge. One factor is the return of funds to former Mt. Gox clients. In July, 50,000 BTC were distributed through Kraken, and another 5,000 BTC recently went to Bitstamp.
Market Pressure Increases
Additional pressure comes from traders. With the rise in open short positions on the futures market, the funding rate has dropped below neutral. This delay affects the timeline for testing the previous all-time high of $73,800.
