US Treasury Yields Outperform Cryptocurrency Carry Trade, Market in 'Indifference' Phase - Glassnode

Key Points of This Article

• $69,000 is a critical price range
• Implied volatility is approaching its lowest levels

Institutional Investor Participation Stagnates

On the 29th, on-chain analysis firm Glassnode released its weekly report on the cryptocurrency market. It noted that the spot trading volume is at its lowest level since 2019 based on the number of Bitcoin, with both inflows and outflows to exchanges being inactive, and the sell side of the order book is thinning.

In particular, US Treasury yields are surpassing cryptocurrency carry trades, leading to a situation where potential new buyers are holding cash instead of purchasing cryptocurrencies.

A cryptocurrency carry trade involves buying Bitcoin (BTC) in the spot market while simultaneously selling the same amount of Bitcoin futures, profiting from the price difference. Futures prices are often set higher than spot prices, allowing traders to capture this difference at maturity.

Glassnode pointed out that such trades support institutional participation in the cryptocurrency market, but the three-month futures basis of cryptocurrencies (the price difference from spot) has been below the yield of two-year US Treasuries since February. This is cited as a reason why institutional funds are currently distancing themselves from the cryptocurrency market.

Next, Glassnode noted that the spot price of Bitcoin is trading within the range of approximately $62,000 to $68,000, which is where the majority of investors acquired their holdings at that price.

This accumulation zone is almost evenly split. Half consists of short-term holders who bought during this year's downturn, while the other half comprises long-term holders who have endured the decline. Long-term holders tend to act as a price support, while short-term holders are more sensitive to market movements.

Therefore, Glassnode stated that the acquisition price of short-term holders around $69,000 is a crucial line that will influence the next market development.

Options Market Predicts a Quiet Market

Both deposits and withdrawals to exchanges have decreased. This is at the quietest level in the past three years and significantly below the standard levels from 2023 to 2025. The balance held within exchanges has also remained flat since early July after a gradual increase from April's lows.

Glassnode expressed that this situation suggests market 'indifference' rather than asset liquidation or accumulation. Such patterns are often observed during quiet phases in the middle of bear markets.

Additionally, inflows into spot ETFs (exchange-traded funds) briefly turned positive in mid-July but quickly reverted to negative. However, compared to the large outflows from June to early July, this scale is smaller, indicating a stagnation in fund flows as well.

In the options market, the entire curve of implied volatility has reached near the lower limit of the range, with six-month options nearly at their all-time lows. Options traders are anticipating a quiet market over the next six months.

Glassnode pointed out that if Bitcoin regains the short-term holder acquisition price of $69,000 with volume following a change in monetary policy, and if ETF inflows turn into net buying, it could signal market improvement. Conversely, if prices drop below $62,000 to $68,000 and deposits for selling on exchanges increase, this outlook would be invalidated.