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Bitcoin experienced a brief dip, reaching as low as $68,500, primarily due to investor profit-taking. However, the decline was short-lived, as bullish buyers quickly intervened, pushing the price back to $70,500.
Market Sentiment Weighed by Inflation Data
Bitcoin soared to fresh all-time highs during Thursday's European trading hours, reaching the $73,800 range.
Despite this, the day closed with the cryptocurrency trading approximately 3.5% lower, hovering around $70,500. This drop was influenced by hotter-than-expected US Producer Price Index (PPI) inflation data, following earlier reports of higher-than-expected Consumer Price Index (CPI) figures earlier in the week.
The consequent rise in the US dollar and bond yields contributed to a negative sentiment among investors.
Spot Bitcoin ETF Buying Supports Upside Momentum
Despite the recent dip, Bitcoin's price has remained up nearly 60% since the beginning of the year. The driving force behind this upward trend has been the consistent buying of spot Bitcoin ETFs by investors in the United States.
According to Crypto News, net ETF inflows amounted to $700 million on Wednesday, following a record high surpassing $1 billion on Tuesday. However, the approval of spot Bitcoin ETFs in mid-January has led to significant speculation in the Bitcoin market.
Future funding rates have been consistently high since February, indicating a bullish market among traders.
A Coin Telegraph report says that historically, all-time highs have served as battlegrounds where both upward and downward volatility collide, requiring time to "resolve" before continuing a trend.
Additionally, open interest in the Bitcoin futures market has surged from around $22 billion to nearly $35 billion since February 24th, coinciding with a 36% increase in the Bitcoin price. This surge in trading activity, coupled with elevated funding rates, raises concerns about the potential vulnerability of the market to leverage flushouts.
Despite the recent price drop, the impact on the futures market has been relatively contained. According to data from coinglass.com, more than $100 million in long positions were liquidated on Thursday, indicating that significant bullish leverage remains in the market, heightening the risk of further price declines.
Photo: Harrison Kugler/Unsplash
