The Bitcoin (BTC) price has downtrended since it tested $70,300 on May 27, and is currently near $67,500, a 4% drop in two days. However, the $66,000 support has been holding firm since May 17, providing some reassurance to the bulls who are not yet alarmed by this correction.
The potentially concerning data comes from Bitcoin derivatives markets, as the number of BTC equivalent leverage bets, known as open interest, rose to a 16-month high on May 29.
Investors move away from fixed-income positions, favoring Bitcoin’s performance
Macro trends have influenced Bitcoin’s performance as the S&P 500 is currently just 1.2% below its all-time high of 5,342 from May 23, indicating a robust stock market. Additionally, the 5-year Treasury yield has increased to 4.63% from 4.34% two weeks ago, suggesting that traders are moving away from fixed-income positions.
This shift was particularly notable following weak demand at a Treasury Department auction on May 28, which pushed the benchmark yield to levels that stock investors may find concerning.
On May 29, the aggregate Bitcoin futures open interest reached 516k BTC, the highest since January 2023 and a 6% increase over the past week.
Aggregate Bitcoin futures open interest, BTC. Source: Coinglass
Chicago Mercantile Exchange (CME) leads the market with a 30% share, followed by Binance with 22%, and Bybit with 15%. This substantial open interest, equivalent to $34.8 billion, is a double-edged sword for the market.
The high open interest can indicate a bullish sentiment, as it shows a strong appetite for Bitcoin futures. However, if bulls rely excessively on leverage, a typical 10% market correction could trigger cascading liquidations, exacerbating the price drop. Notably, Bitcoin’s price has shown resilience since regulatory pressures in the United States have eased.
Positive regulatory developments include the approval of a spot Ethereum (ETH) exchange-traded fund, the Senate’s vote to repeal the Securities and Exchange Commission’s proposed SAB 121 accounting rule, and Congress passing the FIT 21 reform, allowing most crypto to be treated as commodities and regulated by…
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