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Bitcoin Demand Shock Explained: Buying Pressure, Open Interest, Funding Rates

2 mins
Updated by Harsh Notariya
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In Brief

  • Institutional demand drives Bitcoin’s price to $71,000, with spot ETFs seeing record inflows.
  • BlackRock’s IBIT acquires $780 million Bitcoin in three days; weekly ETF inflows exceed $1.7 billion.
  • Rising open interest, neutral funding rates, and low exchange supply signal potential explosive growth.
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The current situation for Bitcoin (BTC) reveals a pronounced demand shock, with prices steady at around $71,000. Demand from institutional investors, especially through spot Bitcoin Exchange-Traded Funds (ETFs), fuels this increase.

Spot Bitcoin ETFs have experienced unprecedented net inflows. For the past 18 days, they have recorded continuous positive inflows, the longest streak since their inception.

Is Bitcoin Awaiting Explosive Price Growth?

Among Bitcoin ETFs, BlackRock’s iShares Bitcoin Trust (IBIT) is particularly noteworthy. It accumulated $350 million on Thursday, the highest in the last two trading months. In total, IBIT has acquired nearly $780 million worth of Bitcoin over the past three trading days.

This week alone, Bitcoin ETFs collectively saw inflows exceeding $1.7 billion. Significantly, June 4 marked the highest daily inflow of the week, with spot Bitcoin ETFs collectively attracting $886 million.

“That’s the highest weekly inflow since launch (+$1.7 billion) – and we still have one day left,” crypto analyst Miles Deutscher said.

Due to this spot Bitcoin ETF inflows, Mati Greenspan, the research and advisory fund Quantum Economics founder, said in an interview with BeInCrypto that Wall Street’s demand is unprecedented.

“Not only did they come online super strong at the start of the year, but they’ve also managed to sustain their appetite in the face of rapidly shifting macro conditions,” Greenspan told BeInCrypto.

Additionally, the discrepancy between Bitcoin miners’ output and ETF purchases highlights the shock in demand. Crypto investor Adam Back highlighted that while Bitcoin miners produced just 450 BTC on June 4, ETFs bought a staggering 12,508 BTC.

Read more: Who Owns the Most Bitcoin in 2024?

Despite these bullish activities, the Bitcoin funding rate remains neutral. This rate is crucial for maintaining market equilibrium and is a fee exchanged between traders of perpetual future contracts. It aligns the contract’s price with the Bitcoin spot price.

Despite high Bitcoin prices, a neutral funding rate suggests a balanced market sentiment with a reduced risk of sudden downturns.

“Last time we were here (in March/April) – it was a sea of orange/red (high funding rate),” Deutscher added.

Furthermore, the open interest in the CME (Chicago Mercantile Exchange) Group is rising, approaching all-time highs once again. Analyst Vetle Lunde from K33 Research reports that this increase is driven by more direct participant exposure and solid inflows into leveraged ETFs.

Open interest, which represents the total outstanding derivative contracts not yet settled, has reached an 11-week high, surpassing 75,000 BTC. This measure indicates growing market liquidity, and mirrors heightened market sentiment and engagement.

Moreover, according to CryptoQuant data, the supply of Bitcoin on crypto exchanges is at a one-year low.

“Right on time for a second wave of ETF Flows. Demand shock + Inelastic supply,” Bitcoin investor, Thomas Fahrer said.

Read more: Bitcoin (BTC) Price Prediction 2024/2025/2030

Bitcoin Exchange Reserve
Bitcoin Exchange Reserve. Source: CryptoQuant

This traditional economic scenario of high demand coupled with low supply suggests potential explosive price growth for Bitcoin. The convergence of increasing institutional demand, balanced market mechanisms via neutral funding rates, and a tightening Bitcoin supply outline a promising outlook for its near-term valuation trajectory.

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Harsh Notariya
Harsh Notariya is a journalist and crypto expert that excels in delivering the latest Web3 and Crypto News. Previously, as a Growth Marketer at Sporty and a Community Consultant at Totality Corp, he significantly boosted community engagement and followers. Harsh also crafted engaging content for top crypto influencer Shivam Chhuneja, blending meme references for an educational yet fun experience. His versatile skills make him a notable figure in crypto journalism.
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