Bitcoin’s price experienced a significant decline on April 30, following the lackluster launch of a spot BTC exchange-traded fund (ETF) in Hong Kong. Despite initial expectations of $140 million in demand, the total trading volume, including Ether (ETH) ETFs, on the opening day only reached $12.4 million. As a result, the premium on Bitcoin futures dropped to its lowest level in five months, indicating a potential bearish outlook.
The negative pressure on Bitcoin’s price can be attributed to several factors. One factor is the diminished investor confidence in the United States Federal Reserve’s ability to reduce interest rates twice in 2024. Fed Chair Jerome Powell’s upcoming remarks on May 1 have prompted cryptocurrency traders to exercise caution.
Additionally, concerns have arisen due to four consecutive sessions of net outflows from U.S.-listed spot Bitcoin ETFs. Investors have been withdrawing funds from the Grayscale GBTC ETF due to its high fees, while the Blackrock IBIT ETF has seen minimal activity. Therefore, despite the underwhelming performance of the Hong Kong spot ETF, the demand for such investments in the U.S. appears to be declining.
Previously, the Hong Kong exchange (HKEX) had listed cryptocurrency ETFs based on futures contracts, attracting $529 million in net inflows in the first quarter of 2024. Thus, the weak debut of the spot instrument on April 30 was unexpectedly disappointing. However, some analysts, including Bloomberg’s Eric Balchunas, suggest that poor timing may have contributed to the low trading volumes.
In traditional markets, the S&P 500 is expected to record its first negative monthly performance in six months in April, while yields on U.S. 5-year Treasury notes have increased from 4.2% to 4.7% over the month. These factors reflect higher return demands from investors. Often, traders exit fixed-income positions if they anticipate rising inflation or continued growth in U.S. debt. As the government is compelled to increase market liquidity, the value of its bonds decreases.
Moreover, the recent drop in Bitcoin’s price to $60,172 on April 30 can be attributed to fears of an economic slowdown. McDonald’s reported a modest 2% year-over-year growth in adjusted earnings, and automaker Volkswagen announced a 2% drop in sales for the first quarter of 2024.
Given the volatility in traditional markets and the decreased interest from institutional investors in Bitcoin ETFs, it is not surprising that the BTC futures premium reached its lowest level in five months. In stable market conditions, monthly contracts typically trade at a premium of 5% to 10% above spot markets due to their longer settlement periods.
According to Laevitas.ch, the annualized premium for BTC futures fell to 7.5% on April 30, a drop from 11% just a week earlier. Despite the worsening sentiment, this indicator remained at a neutral level, which is relatively positive considering Bitcoin’s price had declined by 9.5% over the previous week.
To gain a more accurate understanding of market sentiment, it is crucial to examine the Bitcoin options skew. A skew metric above 7% suggests expectations of a price drop, while a skew below -7% indicates bullish sentiment.
The Bitcoin options delta skew shifted from a bullish -7% on April 28 to a neutral 1% currently, indicating a balanced demand for call (buy) and put (sell) options. This shift suggests that investors were initially optimistic about the Hong Kong spot ETF launch but adjusted their expectations after witnessing the disappointing trading volumes. Therefore, traders should not be overly concerned about the decline in the Bitcoin futures premium.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.