An analysis says new institutional money is not flowing into the bitcoin market in earnest as U.S. Treasury yields outpace returns from crypto carry trades. With trading volume, exchange fund movements and spot ETF flows all slowing, the market has lost direction and entered a wait-and-see phase.

CoinPost, a blockchain media outlet, reported on Wednesday that on-chain analytics firm Glassnode said in a weekly report that spot bitcoin trading volume by quantity has fallen to its lowest level since 2019. The scale of exchange deposits and withdrawals also dropped to the quietest level in recent years.

Glassnode analysed that the appeal of carry trades, which had underpinned institutional participation in the crypto market, has fallen sharply. A carry trade is a strategy that buys spot bitcoin while selling futures in the same amount to capture the price difference between futures and spot as profit. But the basis on 3-month bitcoin futures has been below the yield on 2-year U.S. Treasuries since February, reducing its relative attractiveness, it said. As a result, institutional funds appear to be holding cash and waiting for an entry point rather than flowing into the crypto market, the report said.

Price action is also failing to show a clear direction. Glassnode said bitcoin is currently trading in the $62,000 to $68,000 range, where investors' average purchase prices are concentrated. In this zone, holdings are split almost evenly between short-term holders and long-term holders who bought during this year's downturn, it said.

The report pointed to around $69,000, the average purchase price for short-term holders, as a key level likely to determine the market's next direction. A recovery of $69,000 accompanied by trading volume could signal improving sentiment, it said. If bitcoin breaks below the current support zone of $62,000 to $68,000, bearish momentum could strengthen, it added.

Exchange fund flows are effectively stalled. The scale of bitcoin deposits and withdrawals fell to its lowest level in the past 3 years, and exchange bitcoin balances rose gradually after an April low but have moved largely sideways since July. Glassnode said this points to indifference among market participants rather than active buying or selling, calling it a typical pattern often seen in the middle of a bear market.

Spot ETF flows also failed to show a clear rebound. Net flows briefly turned positive in mid-July but soon reverted to net outflows. Compared with the large outflows seen from June to early July, the scale has not been large, and flows are closer to being stagnant, Glassnode analysed.

Similar signals appeared in derivatives markets. Implied volatility in the options market remains low across maturities, and the 6-month contract has fallen to what is effectively a record low. That suggests options investors see a high likelihood bitcoin will move without large volatility over the coming months.

Glassnode said a market rebound will require simultaneous improvement in prices, flows and the macroeconomic environment. If bitcoin regains $69,000 on strong volume alongside a shift in spot ETF flows back to net inflows, it could signal improving conditions, it said. But if support at $62,000 to $68,000 breaks and bitcoin inflows to exchanges for selling increase, the bearish outlook could intensify further, Glassnode warned.