Bitcoin bullish sentiment cools down across the board! The short-term theme will be "consolidation and pullback"?

According to Zhitong Finance and Economics APP, with the two core driving forces of Bitcoin fading, traders who were previously bullish on Bitcoin seem to have reduced their bullish bets on the world's largest market value cryptocurrency. CryptoQuant data shows that on April 19th, the Bitcoin funding rate - the premium that traders need to pay to open new long positions in the cryptocurrency perpetual futures market, turned negative for the first time since October 2023. This indicator highlights that under the catalysis of the Bitcoin "halving" event and a batch of US Bitcoin spot ETFs pushing Bitcoin to record highs, the demand for Bitcoin in the market has slowed down. At least in the short term, consolidation or downward correction may be difficult to avoid.

In recent weeks, the net inflow of funds into these Bitcoin spot ETFs has decreased, and the highly anticipated "halving" event had minimal impact on the Bitcoin trading price last week. "Halving" is a major event in the Bitcoin market that occurs every four years, significantly reducing the rewards received by miners who ensure the security of the Bitcoin blockchain, and greatly reducing the supply of new coins in the market.

The price of Bitcoin reached a historical peak of $73,798 in March, but has since corrected by nearly 13%, with the price of Bitcoin hovering around $63,200 on Thursday. Global cryptocurrency buyers seem to have cooled their enthusiasm for the original cryptocurrency, partly due to increasing risk aversion related to the Middle East tensions, and the expectation that the Federal Reserve may not cut interest rates this year has severely hit the risk appetite in the cryptocurrency market.

In the view of some cryptocurrency analysts, the diminishing expectations of a Federal Reserve interest rate cut may lead investors to temporarily choose to hold more traditional assets such as high-yield low-risk government bonds, which could trigger significant volatility in the cryptocurrency market. The cryptocurrency market may be negatively impacted by the diminishing expectations of a Federal Reserve interest rate cut. Undoubtedly, the long-term maintenance of high interest rates by the Federal Reserve means that the risk-free rate of return on the denominator side of the DCF model remains high, and this potential trend has a very close relationship with the strong bearish sentiment towards cryptocurrencies such as Bitcoin, as well as the overall downward trend in investor risk appetite for cryptocurrencies.

When evaluating assets, investors traditionally place great importance on the Federal Reserve's interest rate decisions and the management mechanism of Federal Reserve monetary policy expectations. When the market expectation of declining interest rates heats up across the board, funds are expected to flow into high-risk high-yield assets, while the holding value of traditional low-risk assets such as government securities is likely to plummet, making Bitcoin and other cryptocurrency assets more attractive.

In March this year, the Bitcoin funding rate reached its highest point in three years, indicating that the bullish momentum in the cryptocurrency market was overheated, but as of this Tuesday, the rate has dropped below zero. Julio Moreno, research director at CryptoQuant, said: "This certainly means that the desire of traders to open long positions in Bitcoin has significantly weakened." Cost reduction of bullish Bitcoin through perpetual futures

K33 Research analyst Vetle Lunde pointed out that the continuous 11-day decline from neutral to below-neutral funding rates is extremely unusual. After previous rate declines, a large amount of leveraged betting ratios may quickly appear. "In this regard, the length attribute of this wave of discounted trades may indicate further consolidation or pullback in Bitcoin prices," he added.

Shrinking demand signal for US Bitcoin ETF

It is worth noting that while funding rates are declining, the daily inflow volume of Bitcoin spot ETFs in the US market is also continuously decreasing.

According to the latest statistics from financial institutions, the net inflow scale of 11 Bitcoin spot ETF products issued in the US market this month is $170 million, far below the approximately $4 billion during the same trading period in March.

The open interest scale of the Bitcoin futures market of the Chicago Mercantile Exchange Group has also dropped by about 18% from its historical high, indicating that some US investment institutions are wavering in their interest in Bitcoin-related allocations and hedging.

As the crypto market looks for new upward momentum, all eyes are on Hong Kong, where it is expected to soon launch a batch of Bitcoin spot ETFs in the Hong Kong market. However, whether they can attract even a small portion of the market demand enjoyed by US issuers remains to be seen