The open interest in futures for key cryptocurrencies such as Bitcoin, Ethereum, and Solana has significantly decreased amid growing macroeconomic uncertainty.
Sharp Decline in Futures Open Interest
Crypto traders are scaling back long positions as uncertainty builds, with futures open interest dropping sharply amid trade war worries and the Fed’s tough stance. In a post on March 4, Singapore-based blockchain firm Matrixport revealed a substantial drop in futures open interest for Bitcoin, Ethereum, and Solana.
Macroeconomic Instability and Its Impact
The firm notes that many traders seem to be waiting for clearer signals before re-entering the market, with the Fed’s policies remaining a key concern. The warning comes as U.S. President Donald Trump announced 25% tariffs on goods from Mexico and Canada will take effect from March 4, ramping up trade tensions and rattling financial markets.
Institutional Investors' Role in the Market
Matrixport also noted the growing role of Wall Street investors. While wealth and asset managers see Bitcoin as a long-term investment, hedge funds are using arbitrage strategies to profit from Bitcoin’s volatility. Per Matrixport, these hedge funds 'collectively hold $10 billion in Bitcoin ETFs, and with total inflows reaching $39 billion, this suggests that at least 25% of Bitcoin ETF capital is tied to arbitrage trades.'
Despite the temporary market downturn and threats of macroeconomic instability, analysts and institutional investors continue to monitor the situation, expecting Bitcoin and other key cryptocurrencies to have the potential for recovery.
