Key Points
Amidst macroeconomic uncertainty, futures open interest in key cryptocurrencies has significantly declined. This suggests that traders are cutting back on their positions. Crypto traders are specifically reducing their long positions due to growing uncertainty. The futures open interest has seen a sharp decrease due to concerns about the trade war and the Federal Reserve’s firm stance.
Market Reaction to Uncertainty
Singapore-based blockchain company Matrixport disclosed in a March 4 post on X that there has been a substantial decline in open interest for Bitcoin, Ethereum, and Solana futures. Notably, the open interest for Ethereum has reverted to levels last seen in the summer of 2024. Despite a recent tweet from Trump about a potential Strategic Bitcoin Reserve and the forthcoming White House Crypto Summit on March 7, the market continues to be in risk-off mode. Market participants are reducing their exposure, according to independent analyst Markus Thielen.
The blockchain company observes that many traders seem to be holding off on re-entering the market until there are clearer signals. The policies of the Federal Reserve remain a significant concern. This cautionary note comes as U.S. President Donald Trump announced that 25% tariffs on goods from Mexico and Canada will be implemented from March 4. This has escalated trade tensions and unsettled financial markets.
In late February, analysts at Matrixport cautioned that the price of Bitcoin could remain under pressure until April due to a stronger U.S. dollar and changing market dynamics. As Bitcoin becomes more linked to traditional finance, the analysts now anticipate that the price downturn will continue until April. They suggest that Bitcoin may attempt to recover to previous highs following the correction.
Matrixport also highlighted the increasing influence of Wall Street investors. Wealth and asset managers view Bitcoin as a long-term investment, while hedge funds are leveraging arbitrage strategies to profit from Bitcoin’s volatility. According to Matrixport, these hedge funds “collectively hold $10 billion in Bitcoin ETFs, and with total inflows reaching $39 billion, this implies that at least 25% of Bitcoin ETF capital is connected to arbitrage trades.”