Bitcoin 's price has risen 17.5% over the past seven days, reaching above $50,000 for the first time since December 2021. Bitcoin ’s price movement today can be partly attributed to inflows of funds into exchange traded funds (ETFs) on the local market, which began trading on January 11. However, the question remains: are the current inflows of funds strong enough to justify Bitcoin’s further rise above the $50,000 level?
The world’s largest mutual fund managers, including BlackRock, Fidelity and ARK 21 Shares, have successfully launched their local market ETFs for Bitcoin, and the value of these instruments has exceeded $10 billion in just one month. Inflows intoBitcoin spot ET Fs are expected to increase in the coming months as investment firms complete the process of examining these newly launched investment instruments.
With Bitcoin reaching new multi-year highs, let’s take a look at how retail investors currently view the cryptocurrency and macro markets.
Retail investors are closely following both macroeconomic trends and the cryptocurrency market
Investors are focusing on the macroeconomic landscape after the S&P 500 closed above 5,000 points for the first time ever on Feb. 9, up 13.9% in three months. The upward momentum may temporarily slow down as investors review the quarterly results of several companies expected this week, including Coca-Cola, Airbnb, Coinbase and DoorDash.
U.S. CPI inflation data is also expected on February 13, and will influence the U.S. Federal Reserve’s (Fed) interest rate path. Market consensus points to the possibility of a multiple cut from the current level of 5.25%, which could prompt investors to move out of fixed-income assets.
However, there is no guarantee that the migration toward riskier assets will benefit cryptocurrencies. For example, searches for the phrase „Buy Bitcoin” on Google have held steady for several weeks, indicating that the asset may be far from attracting mainstream attention despite easier access through ETFs in the local market.
The data shows that retail investors tend to lag behind market increases, usually joining the cycle a few days or weeks after reaching important price milestones. However, other indicators, such as demand for stablecoins in China, do not indicate an increase in retail trader activity. Typically, excessive demand from retail cryptocurrency traders causes stablecoin premiums to rise above 1.5%, while bull markets lead to discounts.
Currently, stablecoin USD Coin is trading above the official US dollar currency, maintaining a 1% premium for the past four weeks. Bulls may interpret the lack of enthusiasm as a positive sign, indicating that the typical FOMO (fear of missing out) behavior seen in retail investors has not yet emerged.
Professional bitcoin traders have recently increased their leveraged long positions.
The ratio of net long to net short of major investors takes into account various factors that may have only affected stablecoin markets. Analysts can better assess whether large investors and arbitrage bureaus are more inclined to be bullish or bearish by consolidating positions in the spot, perpetual and quarterly futures markets.
On Binance, the ratio of long to short most important investors now stands at 1 .35, up from 1.24 on February 9, indicating that large investors and arbitrage bureaus have increased their long positions despite a 14% weekly increase. Meanwhile, major investors on OKX have moved from a ratio of 0.46 in favor of short positions to the current 1.07 long to short as of February 12. In fact, investors on OKX originally bet against a rally above $45,000, but quickly changed their position to a bullish outlook.
Data from professional Bitcoin traders long to short suggest confidence after BTC broke above $49,000 on Feb. 12, making sentiment extremely positive. While short-term risks to the Bitcoin price may come from macroeconomic uncertainty and weakness in China’s real estate markets, this also opens the door for investors looking for alternative investments to protect against inflationary pressures.
A sustained rise above $50,000 has occurred without excessive leverage and FOMO (fear of missing out) on the part of retail investors. Nevertheless, the continuation of the rally also depends on the ongoing absorption of funds by ETFs in Bitcoin’s local market.