Source: Zhitong Finance
The Bitcoin financing rate turned negative during the halving period; if the ratio is higher, it indicates that Bitcoin investors are still bullish.
As Bitcoin's two core drivers subside, previously bullish Bitcoin traders seem to have cut back their bullish bets on the world's largest cryptocurrency by market capitalization. CryptoQuant statistics show that on April 19, the Bitcoin financing rate — the premium that traders need to pay to open new long positions in the cryptocurrency perpetual futures market — became negative for the first time since October 2023. This indicator highlights that, catalyzed by the Bitcoin “halving” event and after a number of US Bitcoin spot ETFs pushed Bitcoin to record highs, market demand for Bitcoin has slowed, and consolidation or downward pullback may be unavoidable, at least in the short term.
The net inflow of these Bitcoin spot ETFs has declined in recent weeks, and the eagerly anticipated “halving” event had little impact on Bitcoin trading prices last week. The “halving” is a major event in the Bitcoin market every four years. It drastically cuts the rewards received by miners who ensure the security of the Bitcoin blockchain and drastically reduces the supply of new tokens in the market.
Bitcoin's trading price reached an all-time high of $73,798 in March, but since then it has been corrected by nearly 13%, and the price of Bitcoin hovered around $63,200 on Thursday. Global cryptocurrency buyers can say that their bullish enthusiasm for the original cryptocurrency has cooled, in part due to growing risk aversion related to the tense situation in the Middle East and the expectation that the Federal Reserve may not cut interest rates during the year have severely dampened risk appetite in the crypto market.
According to some cryptocurrency analysts, the continued cooling of expectations of the Federal Reserve's interest rate cuts may cause investors to temporarily choose to hold more traditional assets such as low-risk treasury bonds with high yields, which may cause large fluctuations in the cryptocurrency market. The cryptocurrency market is likely to be adversely affected by the continued cooling of expectations of the Federal Reserve's interest rate cuts. Undoubtedly, the Fed's long-term maintenance of high interest rates means that risk-free returns on the denominator side of the DCF model continue to be high, and this potential trend is closely related to the strong bearish sentiment of cryptocurrencies such as Bitcoin and the decline in investors' overall risk appetite for cryptocurrencies.
When evaluating assets, investors have traditionally attached great importance to the Fed's interest rate decisions and the Fed's monetary policy expectations management mechanism. When interest rates fall and market expectations heat up across the board, capital is expected to pour into high-risk, high-yield assets, and the holding value of traditional low-risk assets such as government securities will usually drop drastically, making Bitcoin and other cryptocurrency assets more attractive.
In March of this year, the Bitcoin financing rate reached its highest point in three years, indicating that bullish forces in the crypto market are overheated, but as of this Tuesday, the interest rate has fallen below zero. Julio Moreno (Julio Moreno), head of research at CryptoQuant, said: “This of course means that the desire of traders to open long positions in Bitcoin has greatly diminished.”
Bullish Bitcoin's cost decline through perpetual futures
K33 Research analyst Vetle Lunde (Vetle Lunde) said that currently financing interest rates from neutral to below neutral for 11 consecutive days are definitely unusual, and large leveraged betting ratios may soon appear after falling interest rates in the past. “In this regard, the length attribute of this wave of discount transactions may point to further consolidation or correction in the price of Bitcoin,” he added.
US Bitcoin ETF demand is showing signs of shrinking
What you need to be wary of is that while financing interest rates are falling, the daily inflow of Bitcoin spot ETFs in the US market continues to decline.
According to the latest statistics from financial institutions, so far this month, the net inflow of 11 Bitcoin spot ETF products issued in the US market is 170 million US dollars, far lower than about 4 billion US dollars during the same trading day in March.
The size of the Chicago Mercantile Exchange Group (CME Group)'s open positions in the Bitcoin futures market has also dropped by about 18% from its all-time high, indicating that some US investment institutions' exposure to Bitcoin-related allocations and interest in hedging has wavered.
As the crypto market looks for new upward momentum, all eyes are on Hong Kong, China, which is expected to launch its own batch of Hong Kong-market Bitcoin spot ETFs soon. However, it remains to be seen whether they can attract even a fraction of the market demand enjoyed by US issuers.