Bitcoin's Institutional Support Wanes as Cash Becomes More Attractive

The latest report from Glassnode shows that institutional investors are choosing to sit in cash rather than invest in Bitcoin, citing the crypto carry trade as a less lucrative option. According to Glassnode analyst Frederik Theissen, three-month futures basis has paid less than a two-year Treasury since February, making it more profitable for institutions to hold onto their cash.

This trend has had a ripple effect across various markets, with spot volume hitting its lowest level since 2019 and exchange flows becoming quiet. Even ETF demand has slowed down significantly, all of which can be attributed to the spread making cash a more attractive option for investors.

On-chain data also reveals that Bitcoin is currently trading within a specific cost-basis cluster, where the majority of coins were last sold between $62,000 and $68,000. This area has been particularly challenging for short-term holders, with half of them sitting underwater on this year's decline.

The report notes that the current bear market is the shallowest on record by depth, with Bitcoin remaining relatively close to its 200-day moving average throughout the drawdown. By time, it has spent about three-quarters as long below the average as prior bears, indicating a high level of patience rather than a sign that the low has been reached.

Options markets have also been signaling extreme quietness, with downside protection collapsing to almost nothing and put/call ratios hitting their lowest point for the year. This lack of momentum from leveraged buyers suggests that the market is ripe for a potential recovery.