Bitcoin, Ether extend relief rallies as extreme fear meets renewed ETF buying

Bitcoin ($BTC) rallied, $50 short of $63,000, on July 3, and Ether ($ETH) outperformed the wider market, pushing to $1,775. The end-of-week rally comes a few days after $BTC fell to a 21-month low and $ETH sank to fresh year-to-date lows. Highlighting the negative sentiment, the Crypto Fear & Greed index registered “Extreme Fear” at 11 out of 100.

Crypto Fear & Greed Index. Source: Alternative.me

That gap between the “Extreme Fear” reading and Friday’s bullish market activity is worth noting. On July 2, US spot Bitcoin exchange-traded funds (ETFs) took in a net $221.7 million, their largest single-day inflow since early May and a break from 10 consecutive days of outflows.

Spot Bitcoin ETF netflows. Source: SoSoValue.com

Futures markets fuel Bitcoin and Ether gains

The leverage side of the crypto market looks more one-sided than the spot buying data alone would suggest. “Funding,” the periodic payment traders holding bets on higher prices make to traders betting on lower prices when the market leans bullish, has stayed positive for the past eight days and has been climbing throughout this period.

Bitcoin open interest, funding rate. Source: Hyblock

The total amount of outstanding leveraged Bitcoin positions is also near its highest level in the past several days, even though the price has mostly moved sideways. Leverage building up without price making much progress is generally viewed as a caution sign rather than confirmation that a rally is underway.

Can bulls keep their pace?

Looking at the next few trading sessions, a few reference points stand out. On the cautious side, whether Bitcoin holds above roughly $61,000, where a large cluster of leveraged buy positions sits, matters, and so does whether Wednesday’s ETF inflow turns out to be a one-day event or the start of a new trend.

On the more encouraging side, a move back above $62,500 would put Bitcoin within reach of price levels where leveraged short positions become more exposed, and continued positive buying activity alongside a still-growing pool of leveraged positions would extend the pattern seen over the past few days.

Bitcoin liquidation heatmap. One-month view. Source: Hyblock

The overall market read is mixed rather than clearly bullish or bearish. Spot buying and a rebound in ETF flows suggest sentiment may be improving faster than the fear-and-greed number implies, but a market this deeply fearful and this leveraged toward higher prices tends to be more fragile. The upcoming US holiday-weekend stretch of typically thinner trading adds another layer of uncertainty to the current setup.