Bitcoin Downtrend Continues: New Local Lows Below $59,000
Bitcoin (BTC) has extended its downtrend, hitting new local lows of under $59,000. During the mid-hours of the United States Monday trading session, BTC briefly dropped below $60,000, reaching a new local low of $58,500.
The ongoing decline is due to continued outflows from the U.S. spot Bitcoin exchange-traded fund (ETF) market into the new week.
Signs of Unwinding Basis/Funding Arbitrage
Bitfinex, a crypto exchange, reported a significant drop in Bitcoin futures open interest on the Chicago Mercantile Exchange (CME) and other platforms, signaling the unwinding of basis/funding arbitrage. The open interest on the CME decreased by $220 million in the past week, while the total aggregate open interest across other platforms fell by over $450 million during the same period.
- This decline brought the total Bitcoin futures open interest down from a record high of $36.99 billion on June 7 to $33.3 billion.
- Negative funding rates observed on various exchanges in the past week coincided with the reduction in open interest, suggesting unwinding of funding arbitrage trades linked to ETF flows.
Bitcoin Potential Bottom Approaching
According to analysts at Bitfinex, the heavy outflows from Bitcoin ETFs could indicate that BTC is approaching its potential bottom. Historically, significant ETF outflows have often correlated with the formation of local price bottoms.
- When BTC dipped below $70,000 in early June, U.S. spot Bitcoin ETFs experienced seven consecutive days of net outflows, reflecting the impact of sharp price movements on ETF investors.
- Monitoring this pattern can provide insights into potential market reversals or stabilization points.
Caution: Bearish Market Sentiment Persists
Despite the possibility of Bitcoin approaching a bottom, Bitfinex analysts caution that market sentiment remains bearish. Weakness in the lower timeframe range (one-minute to 15-minute charts) across various crypto assets is indicating ongoing negative sentiment in the market.
- While ETF outflows may suggest a potential price stabilization, it is important to consider other market indicators and factors influencing investor sentiment.
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