Bitcoin rally driven more by institutional demand than speculation
(Reuters) -As bitcoin hit a record high on Monday, evidence from institutional flows and derivatives suggested its rally might be more stable and lasting than previous speculative runs.
Bitcoin crossed $120,000 for the first time on optimism over upcoming U.S. House discussions on digital asset regulation, extending its gains this year to about 30%.
The rise has been fuelled by strong flows into bitcoin exchange-traded funds (ETFs) and rising corporate treasury allocations.
Analysts said bitcoin's surge is driven this time by institutional flows and reflects its evolution into a more stable asset, sought after as investors seek diversification from market volatility and a wobbly U.S. dollar.
Institutional inflows tend to be longer-term and less prone to rapid reversal, lending greater stability and durability to the current rally.
Bitcoin ETFs have made a strong start to July, attracting $3.4 billion in inflows so far. That includes a record $2.2 billion over the past two days, the largest two-day net inflow on record, according to data from Farside Investors.
At the same time, open interest in bitcoin futures rose to a record $57.4 billion as of Friday, data from CoinDesk shows.
Open interest tracks the total value of outstanding futures contracts, and a sustained rise often points to greater institutional involvement, as larger investors tend to hold bigger, longer-term positions and use futures for hedging.
Yet, funding rates in the futures market remain subdued. According to CoinDesk, the annualised funding rate stood at 10%, well below the 80% peaks of 2023 and 40% at the end of last year.
The funding rate reflects the cost traders pay to keep bullish, leveraged bets open in the futures market. A decline signals they're less willing to pay to stay in those positions — a sign of reduced speculative demand.
Glassnode data shows bitcoin's estimated leverage ratio has declined to 0.25, down from 0.32 at the start of 2025.
The leverage ratio compares how large traders' futures bets are relative to the amount of bitcoin on exchanges. A lower ratio means those bets are backed by more real capital and less borrowed money.
Glassnode data also showed an increase in short liquidations as traders betting against bitcoin bought back the token as prices rose, adding momentum to the rally.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Star
8 minutes ago
- The Star
Trump will meet South Korea's trade delegation, Seoul says
FILE PHOTO: The South Korean and American flags fly next to each other at Yongin, South Korea, August 23, 2016. Picture taken on August 23, 2016. Courtesy Ken Scar/U.S. Army/Handout via REUTERS/File Photo SEOUL (Reuters) -U.S. President Donald Trump will meet South Korea's trade delegation, South Korea's presidential office said on Thursday, as top officials from Seoul are in Washington to cut a last-minute deal on U.S. tariffs. South Korean Finance Minister Koo Yun-cheol, Industry Minister Kim Jung-kwan and Minister for Trade Yeo Han-koo met U.S. Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer on Wednesday, according to the finance ministry. Industry and trade ministers have been in Washington since last week to reach a deal before August 1, a deadline set by Trump for 25% tariffs to kick in against South Korea, a major U.S. ally and powerhouse exporter of chips, cars and steel. Pressure has been mounting on South Korea since Japan clinched a deal to cut Trump's threatened tariffs to 15% earlier this month. Top business leaders were also reported to be flying in to help lobby for a deal on U.S. tariffs. The South Korean government is negotiating with the U.S. by setting up a package of trade and offers on industrial cooperation such as in shipbuilding, chips and batteries, officials say. (Reporting by Ju-min Park; Editing by Leslie Adler and Alistair Bell)
The Star
35 minutes ago
- The Star
Retail replaces ‘smart money' as the Wall Street rocket fuel
Retail investors have been the 'primary' driver of the current rally. — Reuters Retail investors are often late to Wall Street parties, only catching the rally once it's established and 'smart money' is looking for the exit. But that doesn't appear to be the case this time around. Flow and survey data showed that – far from playing catch-up – retail investors are a key force behind the latest US equity whoosh that has been lifting the S&P 500 and Nasdaq to new highs on a near-daily basis. Retail investor participation as a share of total S&P 500 flow last week reached 12.63%, according to calculations by Goldman Sachs analysts. That's the highest share since February and well above the recent average, as retail participation has rarely exceeded 13% in the last few years, their figures showed. Retail investors have been the 'primary' driver of the current rally, Barclays equity strategists suggest, pouring more than US$50bil into global stocks over the last month. And their enthusiasm for equities is continuing to build, while institutional participation remains 'muted', Barclays strategists noted. 'Re-risking seems to be the priority for small investors as improved sentiment into second-quarter earnings, resilient macro data and US Federal Reserve cut speculation combine to outweigh still-lingering tariff threats and deficit concerns,' they wrote last week. This optimism was underscored in Morgan Stanley's latest quarterly survey of retail investors published last week. It shows 62% of those polled are now bullish US equities, and 66% reckon the US market will rise by the end of the quarter. These are both the highest levels since the survey was launched two and a half years ago. This surge in retail activity could be a positive development. At a basic level, broader participation and democratisation of the market is to be welcomed. And some analysts reckon the retail investor community has matured since 2021 when the 'meme stock' frenzy spilled over into the wider market. But current retail trading still includes some of this highly speculative, often options-related meme stock activity, with the main targets this time around being heavily shorted names like Krispy Kreme, GoPro and Kohl's. Indeed, Bank of America analysts noted, 'zero-day to expiry' options that are popular with retail investors recently accounted for more than 60% of all S&P 500 options trading activity. And the longer the rally continues, the more fears of a major correction that crushes the retail community are bound to grow. These fears are not unwarranted. The latest figures from the Financial Industry Regulatory Authority (Finra) show that margin debt in US stocks has crossed the US$1 trillion mark for the first time. This represents both retail and institutional investors' activity, but according to JP Morgan analysts, the retail cohort is predominantly responsible for the rise. Of course, investors' margin debt would be expected to rise over time in line with inflation and the underlying equity indices, particularly in a bull market. But some analysts still consider rising margin debt a sign of market froth or outright over-exuberance. On top of all this, retail investors may soon get a helping hand from Washington. A series of what Bank of America analysts call 'financial regulation policy-easing' measures are being lined up that will facilitate retail investors' trading in equities and other less-liquid markets. For example, the Trump administration is drawing up an executive order to allow retail investors to add private equity into 401K retirement funds. Media reports also suggest Finra is considering proposals to ease the 'Pattern Day Trading Rule' – which was set up to limit highly speculative trading practices – by slashing investors' minimum margin account balance requirements to US$2,000 from US$25,000 currently. Of course, with deregulation comes higher risk and lower protection for investors. But for now, retail investors are in the driver's seat and enjoying the ride. — Reuters Jamie McGeever is a columnist for Reuters. The views expressed here are the writer's own.
The Star
2 hours ago
- The Star
Seven top Costa Rican ministers to step down
SAN JOSE (Reuters) -Seven Costa Rican government ministers including the vice president and finance minister have presented their resignations, President Rodrigo Chaves said on Wednesday, adding they decided "to seek new horizons to move the country forward." Vice President Stephen Brunner and Finance Minister Nogui Acosta are among those who chose to step down, Chaves said. Major resignations were broadly expected as politicians prepare to pursue candidacies for the Central American nation's next general election, slated for February next year. (Reporting by Alvaro Murillo; Editing by Natalia Siniawski)
