Bitcoin liquidity tightens as ETF inflows decline

According to the latest data from Glassnode, Bitcoin has faced a tightening of market liquidity following the recent BTC peak at $97,000 in February. Meanwhile, inflows into bitcoin-backed exchange-traded funds (ETFs) have plummeted more than 54% from the cycle high. This indicates a drop in investor interest in bitcoin, Coinotag reports.

Such a decline raises concerns about the overall health of the market. The price of BTC has dropped to around $81500 this week, well off the January highs, while open interest in Bitcoin contracts has fallen by 35%, the portal notes.

According to Coinotag, one of the reasons for the current liquidity crunch is the unwinding of the arbitrage trading strategy. This indicates investors’ cautious approach in light of uncertain market conditions and geopolitical tensions.

Thus, due to the growing risks, many institutional investors are reducing their positions, which leads to Bitcoin ETF outflows and further downward pressure on the price of the cryptocurrency, the portal says.