Bitcoin ETFs Surge Amidst Institutional Demand but Bearish Sentiment Grows

Bitcoin ETFs experienced significant inflows exceeding $900 million, highlighting strong institutional demand. However, Bitcoin’s open interest has fallen, and its funding rates have turned negative, indicating a possible shift in market sentiment towards bearishness, as evidenced by increased put options trading.

On Wednesday, Bitcoin ETFs amassed over $900 million in new capital, continuing their streak of inflows. This positive response comes despite a decrease in Bitcoin’s open interest and negative funding rates, signalling a possible shift in market sentiment.

BTC spot ETFs have demonstrated significant demand, with net inflows of $916.91 million recorded on Wednesday. This marks a fourth consecutive day of inflows, showcasing the increasing institutional interest as Bitcoin attempts to maintain its price above the $90,000 threshold.

Leading this inflow movement, BlackRock’s ETF IBIT achieved $643.16 million in net inflows, bringing its cumulative total to $40.63 billion. Following closely, Ark Invest and 21Shares’ ETF ARKB received $129.50 million, raising its historical net inflows to a total of $3 billion.

Notably, trading activity in the crypto market has seen a decline, reflecting a $18 billion drop in market capitalisation over the past 24 hours. Consequently, BTC’s price has also experienced a modest decline of 1%. This decrease has been mirrored by a 5% drop in BTC’s futures open interest, which currently stands at $64.54 billion, indicating waning trading participation.

A simultaneous decrease in an asset’s price and a reduction in open interest suggests that traders are closing positions rather than entering new ones, pointing to a loss of confidence and potential reversal in the Bitcoin market. Additionally, BTC’s funding rate has turned negative at -0.0053%, implying that short sellers are paying to sustain their positions, indicative of a prevailing bearish sentiment.

The current landscape is further supported by the high demand for put options in the BTC market. Deribit’s data shows a put-to-call ratio of 1.36, with more puts being traded than calls, suggesting that options traders are anticipating further declines in Bitcoin’s price.