Bitcoin (BTC) prices plummeted on April 30 after a spot BTC exchange-traded fund (ETF) was launched in Hong Kong without much success. Despite expectations of $140 million in demand, total trading volume, including the Ethereum (ETH) ETF, on opening day was only $12.4 million. Accordingly, the Bitcoin futures premium fell to its lowest level in five months, signaling a bearish outlook.
Negative pressure comes from weak macro conditions and US spot BTC ETF flows.
It is important not to jump to conclusions because other factors also affect the price of Bitcoin. This includes reduced investor confidence in the ability of the US Federal Reserve (Fed) to cut interest rates twice in 2024. Cryptocurrency traders will need to be extra cautious as Federal Reserve Chairman Jerome Powell is expected to speak after the May 1 meeting.
A fourth consecutive session of net outflows from the US-listed spot Bitcoin ETF has raised concerns among traders. Investors are withdrawing funds from the Grayscale GBTC ETF due to high fees, while the Blackrock IBIT ETF is seeing little activity. Therefore, despite the poor performance of Hong Kong spot ETFs, investment motivation in the US appears to be decreasing.
Previously, the Hong Kong Exchange (HKEX) listed a cryptocurrency ETF based on futures contracts, attracting net inflows of $529 million in the first quarter of 2024. So the weak debut of spot products on April 30 was unexpectedly disappointing for many. But some analysts, including Bloomberg’s Eric Balchunas, suggest poor timing may have played a role in low trading volume.
The S&P 500 is on track to post negative monthly performance for the first time in six months this April, while the yield on five-year U.S. Treasury bonds rose from 4.2% to 4.7% during the month, reflecting investors’ demand for higher yields. Traders often exit bond positions if they fear rising inflation or anticipate a continued increase in U.S. debt. The more the government has to increase market liquidity, the lower the bond value.
Moreover, the recent decline in the price of Bitcoin to $60,172 on April 30 may be due to concerns about an economic slowdown. McDonald’s reported a slight 2% year-over-year growth in adjusted profits, while automaker Volkswagen reported a 2% decline in sales for the first quarter of 2024.
Bitcoin options market shows a more dovish view
Considering the volatility in traditional markets and declining institutional investor interest in Bitcoin ETFs, it is not surprising that BTC futures premiums have reached their lowest level in five months. In stable market conditions, monthly contracts typically trade at a 5-10% premium to the spot market due to their longer settlement periods.
According to Laevitas.ch, the annual premium for BTC futures fell to 7.5% on April 30, down from 11% just a week ago. Despite worsening sentiment, this indicator remained at a neutral level. This is a relatively positive sign considering that the price of Bitcoin is down 9.5% compared to last week.
Related: Why did the price of Ethereum (ETH) fall today?
It is also important to examine Bitcoin options skew to more accurately gauge market sentiment. Typically, a skew indicator above 7% indicates expectations of price declines, while a skew below -7% indicates bullish sentiment.
Bitcoin options delta skew has moved from a bullish -7% on April 28 to a neutral 1% today, suggesting demand for call (buy) and put (sell) options is balanced.
This change indicates that investors were initially optimistic about the launch of the Hong Kong spot ETF, but quickly adjusted their expectations after seeing disappointing trading volumes. As a result, traders should not be overly surprised by a decline in Bitcoin futures premiums.
This article does not contain investment advice or recommendations. All investment and trading activities involve risk and readers should conduct their own research when making any decisions.