Top 4 Reasons Why the Crypto Bull Run is Always Faltering

The crypto bull run has lost momentum. Recent rallies by Bitcoin, Ethereum, and XRP failed to hold gains. Analysts warn these may be dead-cat bounces or bull traps. This article examines some reasons why the crypto market rally often fades.

Crypto Bull Run Stalls Amid Waning Activity in the Futures Market

One important reason why the crypto bull run is not materializing is that activity in the futures market has waned recently. This happened because investors remember last month’s massive sell-off. Over 1.6 million traders were liquidated in a single day.

Leveraged trades worth over $20 billion were closed in a day. Data shows that the futures open interest has plunged in the past few weeks. This is a significant number that examines unfilled positions in the futures market and typically indicates liquidity.

According to CoinGlass, the futures open interest has dropped to $144 billion from the October high of $225 billion. This trend is occurring across most cryptocurrencies, with Bitcoin’s value decreasing from $96 billion to $64 billion.

Another important metric in the futures market is the funding rate. This examines the fees paid by bulls and bears to ensure that the futures price aligns with the spot price.

If the futures price is above the spot price, the funding rate is positive, and bulls pay the short position; vice versa. A closer look at the funding rate of most tokens reveals that it has remained flat over the past few weeks. This indicates low liquidity in the market.

For the crypto bull run to occur, the funding rate must be positive. At the same time, the futures open interest will need to be in an upward trend.

Digital Asset Treasury (DAT) Woes Remain

Fewer Digital Asset Treasury companies are buying Bitcoin or other tokens. This lack of institutional accumulation weakens momentum in the crypto market rally.

Existing DAT companies have also faltered, with most of their stocks trading at significantly lower levels than their yearly highs. Michael Saylor’s Strategy stock has plunged to $230, down by 50% from the year-to-date high of $455.

Similarly, BitMine Immersion, a company backed by Tom Lee, has crashed to $40, down from the year-to-date high of $160. SharpLink Gaming stock has tumbled to $11.5, down from $120 earlier this year.

The ongoing stock market crash has led to a decrease in cryptocurrency accumulation, a trend that may persist. Some companies have even started selling their tokens to fund share buybacks.

Bitcoin and Ethereum ETFs’ Woes Continue

Demand for Bitcoin and Ethereum ETFs in the U.S. has dropped in recent weeks. Fewer investors are buying into these funds. This weakening interest is slowing the momentum of the crypto bull run.

Data compiled by SoSoValue shows that spot Bitcoin ETFs have added $525 million in inflows this week.

While this is a good number, these funds shed over $1.2 billion in assets last week and $798 million a week earlier. The cumulative net inflow stood at $60 billion, down from the year-to-date high of over $65 billion.

Ethereum ETFs have shed $107 million this week after shedding $507 million last week. Their cumulative inflows stand at $13.75 billion, down from the year-to-date high of $15 billion. These numbers mean that American investors are opting to stay on the sidelines.

Other Reasons Why the Crypto Bull Run is Always Fading

The crypto bull run is always fading as investors remain fearful. Data shows that the Crypto Fear and Greed Index has dropped into the fear zone, at 30. It is common for the crypto market to retreat when investors are fearful.

Another reason is that investors are constantly booking profits after a strong rally. A notable example of this is the Zcash price, which has declined by over 37% from its year-to-date high of $740. Other top gainers recently, such as Filecoin and ICP, have all experienced significant declines.