By Patturaja Murugaboopathy

(Reuters) -As bitcoin hit a record high on Monday, evidence from institutional flows and derivatives suggested its rally might be more stable and lasting than previous speculative runs.

Bitcoin crossed $120,000 for the first time on optimism over upcoming U.S. House discussions on digital asset regulation, extending its gains this year to about 30%.

The rise has been fuelled by strong flows into bitcoin exchange-traded funds (ETFs) and rising corporate treasury allocations.

Analysts said bitcoin's surge is driven this time by institutional flows and reflects its evolution into a more stable asset, sought after as investors seek diversification from market volatility and a wobbly U.S. dollar.

Institutional inflows tend to be longer-term and less prone to rapid reversal, lending greater stability and durability to the current rally.

Bitcoin ETFs have made a strong start to July, attracting $3.4 billion in inflows so far. That includes a record $2.2 billion over the past two days, the largest two-day net inflow on record, according to data from Farside Investors.

At the same time, open interest in bitcoin futures rose to a record $57.4 billion as of Friday, data from CoinDesk shows.

Open interest tracks the total value of outstanding futures contracts, and a sustained rise often points to greater institutional involvement, as larger investors tend to hold bigger, longer-term positions and use futures for hedging.

Yet, funding rates in the futures market remain subdued. According to CoinDesk, the annualised funding rate stood at 10%, well below the 80% peaks of 2023 and 40% at the end of last year.

The funding rate reflects the cost traders pay to keep bullish, leveraged bets open in the futures market. A decline signals they're less willing to pay to stay in those positions - a sign of reduced speculative demand.

Glassnode data shows bitcoin's estimated leverage ratio has declined to 0.25, down from 0.32 at the start of 2025.

The leverage ratio compares how large traders' futures bets are relative to the amount of bitcoin on exchanges. A lower ratio means those bets are backed by more real capital and less borrowed money.

Glassnode data also showed an increase in short liquidations as traders betting against bitcoin bought back the token as prices rose, adding momentum to the rally.