Bitcoin is outperforming gold, reflecting its growing appeal as an investment. Market liquidity for Bitcoin has decreased, leading to increased price volatility. Stabilization of open interest in the futures market has helped reverse Bitcoin’s price trend.
Laurens Fraussen, a Research Analyst at Kaiko, notes that Bitcoin’s liquidity has dropped significantly, resulting in more volatile price movements. ‘Since October 10, liquidity has dropped from 25,000,000 on average at 1% from the mid-price to 15,000,000 on average,’ he explains.
Stabilization of open interest in the futures market has contributed to a reversal in Bitcoin’s price trend. ‘When we bottomed early February, we saw open interest finally stabilizing in the futures market,’ Fraussen adds.
Bitcoin is currently seen more as a high beta tech stock than an inflation hedge. ‘Right now, it’s more functioning as a high beta tech stock rather than an inflation hedge,’ says Fraussen. This highlights Bitcoin’s evolving role in the market as an asset class.
Rebuilding investor confidence is crucial for Bitcoin to regain its status as a safe haven asset. ‘That’s gonna need time to rebuild that investor confidence,’ Fraussen emphasizes.
The market is currently dependent on Coinbase flows, which significantly influence Bitcoin prices. ‘We are still very dependent on Coinbase flows,’ he states.
A recovery in open interest could signal a potential upward movement in the market. ‘That also needs to recover for us to signal okay hey we’re recovering here,’ Fraussen concludes.