Crypto traders are reducing long positions amid growing market uncertainty, influenced by escalating trade war concerns and the Federal Reserve’s firm stance.
This has led to a notable decline in futures open interest, indicating a shift in investor sentiment. A report from Matrixport highlights a significant drop in open interest for Bitcoin, Ethereum, and Solana futures.
Ethereum’s open interest has dropped to levels not seen since summer 2024. Despite President Trump’s comments on a potential Strategic Bitcoin Reserve and an upcoming White House Crypto Summit, the market remains cautious, with traders hesitating to re-enter. Ongoing concerns about the Federal Reserve’s monetary policies are affecting market sentiment.
The latest warning follows Trump’s announcement that 25% tariffs on goods from Mexico and Canada will take effect on March 4, intensifying trade tensions and unsettling financial markets. Analysts suggest that macroeconomic factors play an increasingly dominant role in shaping crypto market trends as uncertainty grows.
In late February, Matrixport analysts cautioned that Bitcoin’s price could remain under pressure until April, citing the strength of the U.S. dollar and shifting market dynamics. With Bitcoin’s correlation to traditional finance deepening, they expect the downturn to persist for several weeks. However, they suggest that once the correction stabilizes, Bitcoin could attempt a recovery and revisit previous highs.
Adding to the evolving landscape, Matrixport highlighted the growing role of Wall Street investors in the crypto market. While wealth and asset managers continue to treat Bitcoin as a long-term investment, hedge funds are actively leveraging its volatility through arbitrage strategies. Matrixport reports that hedge funds hold $10 billion in Bitcoin ETFs, with total inflows reaching $39 billion. The firm estimates that at least 25% of Bitcoin ETF capital is allocated to arbitrage trades, adding to market volatility. As institutional investors play an increasingly dominant role, their strategies become a key driver of Bitcoin’s price movements.
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