Retail traders were turning bullish on cryptocurrencies in July, according to one major trading venue, although the drop in crypto prices in early August was a shock to many traders. Still, with Donald Trump sounding supportive of cryptocurrencies on the campaign trail, there remains a fair degree of optimism in the market.
Spectrum Markets published its SERIX sentiment data for European retail investors for July, revealing a bullish trend for both cryptocurrencies Bitcoin and Ethereum. The SERIX value for Bitcoin remained stable at a high level with 107 points (down from 108 on June), while the value for Ether increased from 110 to 113 points.
The SERIX value indicates retail investor sentiment, with a number above 100 marking bullish sentiment, and a number below 100 indicating bearish sentiment.
The Spectrum European Retail Investor Index (SERIX), uses the trading venue’s pan-European trading data to shed light on investor sentiment towards current development in financial markets.
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The index is calculated on a monthly basis by analysing retail investor trades placed and subtracting the proportion of bearish trades from the proportion of bullish trades, to give a single figure (rebased at 100) that indicates the strength and direction of sentiment
Bullish trading behaviour on retail crypto
Spectrum said that the bullish trading behaviour, alongside rising prices in July – appears to be backed by recent statements from the U.S. presidential candidate Donald Trump, who promised to transform the United States into a ‘global crypto currency capital and Bitcoin superpower’ with prospects of Bitcoin-friendly regulations if elected.
Trump announced plans to stop selling confiscated Bitcoin stocks and establish a ‘strategic Bitcoin reserve’. Independent candidate Robert F. Kennedy Jr. went even further, advocating for the daily purchase of 550 Bitcoins by the U.S. government to fund a substantial Bitcoin reserve.
Additionally, the Russian government’s legalisation of Bitcoin for export trade payments to counteract Western sanctions has likely been seen by retail investors worldwide as a strong signal, potentially fuelling demand.
“However, the abrupt drop in price of Bitcoin and Ether in early August, took many investors by surprise, highlighting once again the dynamic and unpredictable nature of the cryptocurrency market”, warned Michael Hall, Head of Distribution at Spectrum Markets.
Hall said that in terms of Ether, the bullish sentiment may be driven by the approval of nine Ether ETFs, which began trading on July 23rd. The European Investment Bank’s (EIB) issuance of its first digital bond also contributed as another factor.
Why investors favour Ether
Despite Bitcoin’s advancements, many investors tend to favour Ether due to technological improvements such as ‘staking,’ which allows for dividend payments. Ether is increasingly significant in decentralised finance and Non-Fungible Tokens (NFTs), lowering the barrier for gaming and social media applications. So, at the end there is a strong supportive story also for Ether.
Open interest in BTC drops in August
Since the end of July, total open interest in Bitcoin has dropped by about 12%, from $4.6 billion to $4.1 billion. This decline highlights the substantial liquidations that have impacted the digital assets market, causing a snowball effect that drove prices lower and reflected a strong correlation between market activity on centralised and decentralised exchanges and the recent price action.
A reduction in leverage, while leading to short-term price declines, is often viewed positively by markets as it reduces the risk of over-leveraging, which could result in a more severe market correction if growing more and reaching non sustainable levels.
Ethereum (ETH) spot ETFs saw approximately $105 million in inflows last week, despite the overall negative market momentum. Total flows since inception remain negative, with about $405 million in outflows.
“Considering the challenging environment for spot ETFs, as evidenced by recent BTC Spot ETF flows, and factoring in the expected outflows from the Grayscale Ethereum Trust (ETHE) once it is converted into an ETF, the outlook for ETH spot ETFs appears positive,” said Matteo Greco, a research analyst with Fineqia International.
