Investors are having a hard time pushing Bitcoin (BTC) beyond the $30,000 mark, due to the recent price trends and the delays and reviews of several requests for spot Bitcoin exchange-traded funds (ETFs). Despite this, open interest in Bitcoin’s futures contracts has seen a noticeable uptick, which is likely due to increased demand from institutional traders, whereas the derivatives markets have been relatively quiet.
The main reason cited by many analysts for the lack of buyers driving Bitcoin (BTC)above the $30,000 mark is the reports surrounding the United States Department of Justice considering fraud charges against Binance, as well as the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission currently having their own legal actions against the exchange and its founder, Changpeng “CZ” Zhao.
This has created a mixed sentiment among investors, making it difficult to generate enough momentum for trading at or above the $31,000 level. This has caused banks crypto, core crypto, coinbase crypto, and other crypto market players to look for the best web 3.0 investments, which could be part of the creator economy web 3.0, and to keep up with the AI this week and other AI recent news.
Macroeconomic forces partially explain Bitcoin investors’ discomfort
The current efforts of central banks to control inflation have raised the possibility of a global economic recession, which has caused investors to become more cautious in their decisions, favoring investments in fixed-income, short-term bonds and cash positions. This is evidenced by the U.S. core Consumer Price Index figures, which rose 4.7% compared to the previous year, and the 1.4% decline in eurozone retail sales year-over-year in June. Additionally, the U.S. ISM Manufacturing PMI registered at 46.4 in July, indicating a state of contraction.
Tracking Bitcoin’s price as an indicator, it becomes evident that investors are not displaying confidence in the likelihood of a near-term approval for a spot ETF. This is likely due to the ongoing legal challenges faced by Binance and the potential repercussions of these challenges. Overall, the price of Bitcoin has been predominantly negative over the past 50 days, with frequent visits near the $29,000 support level.
Bitcoin derivatives are extremely important for price guidance
Cryptocurrency-exclusive derivatives exchanges like Binance, Bybit and OKX, as well as traditional financial platforms such as the Chicago Mercantile Exchange, provide a valuable futures market for Bitcoin. Through these contracts, investors can take advantage of leverage and surpass the trading volumes typically seen in regular buying and selling without having to exchange actual BTC.
Data from CoinGlass shows that on Aug. 8, trading activity within the Bitcoin futures market reached approximately $14.5 billion, similar to the levels observed back in May 2022. This market is balanced between buyers (longs) and sellers (shorts), but its expansion allows larger-scale investors to participate and attracts traders with different strategies, including “cash and carry” approaches and miners looking for risk mitigation.
However, the open interest of the Bitcoin futures market does not necessarily mean increased trading activity. In fact, the volume associated with Bitcoin futures has decreased over the past seven months, with daily averages below $7 billion in December 2022, the lowest since then.
The decreased trading activity may be due to the lack of clear confirmation about the ETF decision and the uncertainty of exchanges like Binance and Coinbase due to their clashes with regulators. Also, the current price levels and the broader economic uncertainty are factors that discourage traders from using Bitcoin derivatives.
Subscribe to our email newsletter to get the latest posts delivered right to your email.
Comments