Bitcoin (BTC) rose $50 below $63,000 on July 3, and Ether (ETH) outperformed the broader market to $1,775. The end-of-week rally comes days after BTC fell to a 21-month low and ETH fell to recent year-to-date lows. Highlighting the negative sentiment, the Crypto Fear & Greed Index recorded “Extreme Fear” at 11 out of 100.
Cryptocurrency fear and greed index. Source: Alternative.me
It is worth noting this difference between the “Extreme Fear” reading and Friday’s bull market activity. On July 2, U.S. Bitcoin spot funds (ETFs) recorded a net $221.7 million, the largest single-day inflow since early May and a break from 10 consecutive days of outflows.
Spot Bitcoin ETF network flows. Source: SoSoValue.com
Futures markets are driving Bitcoin and Ether gains
The leverage side of the cryptocurrency market looks more one-sided than spot buying data alone would suggest. “Funding,” the periodic payments that investors betting on higher prices make to investors betting on lower prices when the market is heading higher, has remained positive for the past eight days and has been rising throughout the period.
Bitcoin open interest, funding rate. source: Hyblock
The total number of outstanding leveraged positions in Bitcoin is also near its highest level in several days, even though the price has mostly moved sideways. Building leverage without significant price progress is generally seen as a warning sign rather than confirmation that a rally is underway.
Related: Bitcoin holds 61k dollars after US jobs data report and AI sector weakness: has BTC bottomed out?
Will the bulls be able to maintain the momentum?
Looking at the next few trading sessions, there are a few benchmarks that stand out. On the other hand, what matters is whether Bitcoin stays above around $61,000, where there is a immense cluster of leveraged buys, and whether Wednesday’s ETF inflow turns out to be a one-day event or the start of a recent trend.
On a more encouraging note, a move back above $62,500 would put Bitcoin within range of price levels where leveraged tiny positions become more exposed, and continued positive buying activity along with an ever-growing pool of leveraged positions would extend the pattern seen over the past few days.
Bitcoin liquidation heat map. One month view. source: Hyblock
The overall market reading is mixed rather than clearly bullish or bearish. The spot buying and rebound in ETF flows suggest that sentiment may be improving faster than the fear and greed numbers suggest, but a market this deeply fearful and driven by higher prices tends to be more brittle. The upcoming U.S. holiday weekend, during which trading is typically weaker, adds another layer of uncertainty to the current situation.
