Bitcoin ETF Flows and Market Caution

Despite strong inflows into bitcoin ETFs, traders remain cautious, and bitcoin has struggled to regain bullish momentum after hitting its recent all-time high near $126,219. While institutional demand for bitcoin appears solid, derivatives data suggest that bitcoin traders are uncertain whether key support levels around $117,000 will hold. Monthly bitcoin futures trade at a modest premium of seven percent over spot markets, signaling that optimism remains limited even after a 14% rally in late September.

The broader market environment is influencing bitcoin sentiment. Gold surged to record highs near $4,050 as investors sought safety amid US fiscal stress and slowing economic growth. Rising trade tensions between the US and China, including new port fees and potential tariffs, have pressured equities and impacted bitcoin indirectly. The S&P 500 index fell nearly two percent, reflecting investor fear that escalating trade disputes could reduce corporate earnings.

Bitcoin remains closely watched as a digital asset that sometimes behaves like gold but retains significant correlation with equities, currently at 73% over a 40-day rolling period. Short-term US Treasury yields fell to 3.61%, reinforcing investor caution, while inflation pressures persist, highlighted by a 2.7% rise in personal consumption expenditures in August.

Options markets for bitcoin show elevated delta skew at 8%, suggesting traders are wary of downside risks. Stablecoin metrics, such as Tether trading at a slight discount versus the US dollar in China, indicate previous attempts to exit bitcoin positions when bullish momentum faded. After bitcoin fell below $120,000, the metric returned to parity, reflecting a stabilizing market.

Overall, despite $5 billion in bitcoin ETF inflows in October, derivatives data and macroeconomic risks suggest that traders remain hesitant to turn fully bullish. Short-term turbulence for bitcoin may continue, leaving room for further price volatility and potential downside.