Speculative excess is increasing in the crypto market, prompting caution among Bitcoin (BTC) bulls as the leading cryptocurrency by market value looks to challenge record highs.
According to CoinGlass, the notional open interest or dollar value locked in the active perpetual futures contracts tied to the meme cryptocurrency Shiba Inu (SHIB) has exceeded $100 million for the first time since August 2023. Mark exceeded. SHIB futures have a size of 1,000 SHIB per contract with up to 25x leverage.
Over the past seven days, SHIB's market cap has increased by over 130% to $13.44 million, outpacing the CoinDesk 20 Index's 22% rise. An increase in open interest coupled with an increase in market value represents an inflow of new money into SHIB.
However, it is a sign of speculative exaggeration and an impending correction in the overall market.
Previous instances of open interest in SHIB futures exceeding $100 million have marked preliminary/local Bitcoin price tops.
SHIB is not the only one signaling a speculative upswing. Data collected by 10X Research shows that volumes in South Korea have averaged at or near $8 billion recently, significantly higher than the $1 billion per day observed before the Bitcoin bull market gained momentum.
“There is a wave of retail activity ranging from altcoins to meme coins,” said Markus Thielen, founder of 10X Research, citing the increase in trading volume on Korean exchanges.
Thielen added that Bitcoin could reach a new all-time high of over $69,000 this week as inflows into US-based spot ETFs continue to be significantly higher than the number of BTC created per day. As a result, the imbalance between supply and demand has increased to 1:10.
“Over-the-counter (OTC) trading venues deal with large institutional clients, and according to their aggregated holdings data, holdings have fallen from nearly 10,000 Bitcoins to less than 2,000 in the second quarter of 2023.” This shows that institutions like the Bitcoin -ETF issuers must purchase Bitcoins directly from exchanges through their market makers. The imbalance between supply and demand is 1:10 (daily mining vs. daily ETF demand),” Thielen noted.
Outflows from Grayscale's spot ETF (GBTC) increased late last week, with the fund losing $600 million on Thursday, the largest one-day withdrawal in over a month. Inflows into BlackRock's IBIT fell to $202 million on Friday after reaching $500 million to $600 million for three straight days, according to 10X Research.
According to Thielen, the slowdown is a temporary month-end phenomenon and strong inflows could return this week.
“We expect BlackRock inflows to resume this week. “If Grayscale outflows fall below $100 million, Bitcoin will make a big move higher,” Thielen noted.
At press time, Bitcoin was changing hands at $63,300, up 2% on a 24-hour basis and up 22% in seven days.