The US credit markets are experiencing unprecedented stability, but Bitcoin is facing a shortage of new capital. The New York Federal Reserve’s high-yield distress index has reached its lowest point ever at 0.06. This index evaluates stress levels in the junk bond market by monitoring liquidity, market activity, and corporate borrowing capacity.
Historically, the index surged above 0.60 during the market volatility of the 2020 pandemic and nearly hit 0.80 in the 2008 financial crisis. The current low reading indicates very favorable conditions for risk assets. Reflecting this, the high-yield corporate bond ETF (HYG) has shown positive performance, gaining around 9% for a third consecutive year in 2025 as per iShares data.
Traditionally, such ample liquidity and a robust risk appetite could boost Bitcoin and other cryptocurrencies. However, on-chain data reveals a different scenario. Ki Young Ju, CEO of CryptoQuant, highlighted that Bitcoin capital inflows have “dried up,” with funds moving instead to equities and gold. Concurrently, US equity indices are nearing historic peaks, and AI and major tech stocks are attracting significant risk capital. For institutional investors, the risk-adjusted returns from equities remain appealing enough to sideline cryptocurrencies.
The current state presents a challenge for Bitcoin enthusiasts: despite abundant liquidity, the crypto market is further down the capital allocation chain.
Bitcoin’s Derivatives Market Shows Lack of Directional Movement
Bitcoin’s derivatives market reflects this stagnation. Total open interest in Bitcoin futures is about $61.76 billion, equating to 679,120 BTC, based on Coinglass data. Although open interest increased by 3.04% recently, Bitcoin’s price remains stable around $91,000, with $89,000 acting as short-term support. Binance leads with $11.88 billion in open interest, followed by CME and Bybit.
The steady position adjustments across exchanges suggest participants are hedging rather than taking directional bets. The traditional cycle of whale-retail selling has shifted as institutional players embrace long-term strategies. MicroStrategy, holding 673,000 BTC, shows no signs of significant selling. Spot Bitcoin ETFs have fostered a new class of patient capital, reducing volatility.
Ki Young Ju anticipates no drastic price drops, predicting a period of sideways movement for Bitcoin. The reduced risk of panic selling among large holders diminishes the likelihood of major liquidations, while the absence of immediate triggers limits upward momentum.
Potential Catalysts for Bitcoin Capital Inflows
Several developments could potentially redirect capital to cryptocurrencies: a rotation from equities if valuations prompt a move to alternative assets, a more aggressive reduction in Fed interest rates increasing risk appetite, regulatory clarity attracting institutional investors, or Bitcoin-related catalysts like post-halving supply effects and ETF options trading.
Ki Young Ju commented on the diverse liquidity channels, suggesting that institutions’ long-term holdings have altered the traditional whale-retail sell dynamics. MicroStrategy’s large Bitcoin holdings remain intact as funds have rotated to equities and other assets.
Until these potential triggers emerge, the crypto market is likely to stay in a prolonged consolidation phase. While it is stable enough to avoid a collapse, it lacks the momentum needed for significant appreciation. The paradox persists: despite global liquidity abundance, Bitcoin awaits its share.
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