Bitcoin's $85,000 Recovery Faces Crucial Test as Fund Flows Come Under Scrutiny

Bitcoin's price recovery above $85,000 faces a crucial test after the latest jobs report. The cryptocurrency was trading at $85,276 around press time, up 0.83% over 24 hours, but still below the $86,000 area reached before the report.

A new study by Glassnode suggests that the strongest burst of forced buying occurred before the jobs report, with $50 million of short liquidations in just ten minutes at 04:20 UTC on October 2. This was eight hours before the report was released, and by 15:40 UTC, Bitcoin's price had fallen more than 1% below its pre-release level.

The study also found that open interest, the value of outstanding futures positions, rose by $2.1 billion in the 24 hours before the report, but then fell by $1.5 billion after the report was released. This suggests that the advance in Bitcoin's price was largely driven by short-covering, rather than sustained buying from investors.

However, the US spot Bitcoin ETFs recorded net inflows of $102 million on October 1, according to Farside Investors' flow table. This positive session suggests that fund buying had returned before the report, and that investors may be committing more money to the market.

The next US ETF sessions will provide a crucial test of whether fund investors continue to buy Bitcoin, and whether the market can sustain a recovery above $85,000. If investors continue to commit money to the market, it could weaken the demand concern and support a sustained recovery. But if redemptions increase, it could strengthen the demand concern and put the recovery at risk.