Bitcoin Market Enters Wait-and-See Phase Amid Slumping Institutional Interest

The Bitcoin market has entered a wait-and-see phase, according to on-chain analytics firm Glassnode. Spot trading volume by quantity has fallen to its lowest level since 2019, and exchange deposits and withdrawals have slowed significantly.

Analysts attribute the decline in institutional investment to the reduced appeal of carry trades. Carry trades involve buying spot Bitcoin while selling futures contracts to capture price differences between the two markets as profit. However, since February, the basis on 3-month Bitcoin futures has been below the yield on 2-year U.S. Treasuries, making this strategy less attractive.

As a result, institutional funds appear to be holding cash and waiting for an entry point rather than flowing into the crypto market. Price action is also failing to show a clear direction, with Bitcoin trading in the $62,000 to $68,000 range. This zone contains investors' average purchase prices, with holdings split almost evenly between short-term holders and long-term holders who bought during this year's downturn.

Exchange fund flows are effectively stalled, with the scale of Bitcoin deposits and withdrawals falling to its lowest level in 3 years. Spot ETF flows have also failed to show a clear rebound, briefly turning positive in mid-July before reverting to net outflows.