As risk assets in the financial sector face mounting vulnerabilities, experts are turning their attention to Bitcoin (BTC) and the potential impact of economic factors on the cryptocurrency. The recent release of stronger-than-expected jobs data by U.S. authorities has cast a shadow over risk assets, including BTC. The concern stems from the possibility that the Federal Reserve may not cut interest rates soon, leading to a “slow bleed environment” for Bitcoin.
Despite the challenges facing risk assets, Bitcoin has shown resilience in the face of economic uncertainties. The continued inflows into U.S. spot Bitcoin exchange-traded funds (ETFs) have played a crucial role in supporting Bitcoin’s price. Since May 13, U.S. spot Bitcoin ETFs have experienced a 19-day inflow streak, which was broken on June 10. This influx of funds has helped cushion the impact of market fluctuations on Bitcoin’s value.
However, analysts warn that this trend may be short-lived, as upcoming economic signals could disrupt the flow of funds into Bitcoin. Inflation signals following the U.S. Consumer Price Index report and the Federal Open Market Committee meeting on interest rates are expected to have a significant impact on ETF flows. These near-term events could potentially shift Bitcoin into a “ranging or slow bleed environment,” according to Bitfinex.
In addition to economic factors, market dynamics such as funding rates and futures trading activity are also influencing Bitcoin’s performance. High funding rates in bitcoin perpetual futures markets indicate a growing premium for opening long positions, while rising bitcoin CME futures open interest points to increased arbitrage activity between futures and spot markets. Despite a recent price correction and a leverage flush that wiped out leveraged long positions, Bitcoin’s open interest remains above $36 billion, signaling ongoing market activity.
Although Bitcoin reached a range high above $71,500 before the Friday plunge, it has struggled to sustain its momentum. While Bitfinex does not anticipate a major decline in the short term, the inability of Bitcoin to surpass its range high raises concerns about its future trajectory. The positive ETF flows have offset some of the pressure on Bitcoin, but the cryptocurrency’s failure to break out of its range high remains a point of uncertainty. Concerns about a potential slowdown in inflows and the impact of economic events loom large over Bitcoin’s future prospects.