As a researcher with a background in financial markets, I find the recent trend of outflows from cryptocurrency investment products quite intriguing. The $435 million weekly withdrawal from Bitcoin and Ether investment products is noteworthy, especially given that Bitcoin price has been rangebound for weeks.
According to recent data from CoinShares, there was a significant withdrawal of $435 million from cryptocurrency investment vehicles during the week ending on April 26. This marks the third consecutive week of outflows for Bitcoin and other crypto exchange-traded products (ETPs). The price of Bitcoin has been hovering around the lower end of its $60,000 range without making significant progress.
Bitcoin and Ether saw significant outflows in the wake of the halving event, with Bitcoin experiencing a large exit of $423 million and Ether seeing withdrawals of $38 million. This marks the seventh consecutive week of negative flow for both digital currencies. In contrast, Solana and Litecoin investment products experienced inflows, reporting net deposits of $4.1 million and $3.1 million, respectively.
Based on CoinShares’ analysis, the recent negative outflows can be attributed to a significant decrease in new issuer inflows. Last week, these inflows amounted to just $126 million, which is a marked drop from the previous week’s $254 million.
According to Farside Investors’ data, BlackRock’s Bitcoin ETF, IBIT, saw no new investments for the first time in a week. Similarly, other issuers have experienced days with no inflows over the past few weeks. Grayscale’s GBTC has been experiencing decreasing outflows, leading to a slowdown in new investments.
As a crypto investor, I believe that the recent outflow of funds from the market might be due to my own worries about potential stagflation in the U.S. economy. This economic scenario involves a slowdown in growth rates coupled with persistent inflation, making it less likely for the Federal Reserve to lower interest rates as anticipated.
Based on data from the CME FedWatch tool, traders currently assign a 11.3% probability to the U.S. Federal Reserve implementing a rate cut in June. In contrast, they predict a higher likelihood of a rate reduction in September (44.8%) and November (43.8%). This implies that market analysts anticipate the Federal Reserve will keep interest rates unchanged during May and June, with the first potential decrease occurring later in the year.
Bitcoin bull run experiencing a “short-term pause”
According to analysts at Bernstein, the recent decrease in Bitcoin ETF investments should be viewed as a brief halt rather than a sign of an unfavorable trend, as they anticipate Bitcoin’s bull market will continue.
In a note to clients, Bernstein analysts Gautam Chhugani and Mahika Sapra wrote in a report,
“We don’t expect the Bitcoin ETF slowdown to be a worrying trend, but believe it is a short-term pause before ETFs become more integrated with private bank platforms, wealth advisers and even more brokerage platforms.”
As a researcher studying the Bitcoin market, I’d like to highlight an important prediction made by my team of analysts. We believe that Bitcoin’s price could reach a cycle target of $150,000 by the end of 2025. This optimistic outlook is largely driven by the remarkable surge in demand for Bitcoin Exchange-Traded Funds (ETFs). Since their debut on January 11, these funds have seen impressive net inflows amounting to $12 billion. The unprecedented ETF demand is a significant factor fueling our bullish stance on Bitcoin’s future price trajectory.
As an analyst, I’d encourage you to keep a close eye on the financial landscape, as per the latest findings from Ecoinometrics. A shift in these conditions, according to their report, could significantly impact the ongoing Bitcoin bull market – potentially shaping its future trajectory.
The report notes that the introduction of spot Bitcoin ETFs has brought about a fresh wave of demand. However, unfavorable macroeconomic conditions, such as turning winds and the inability of the U.S. Federal Reserve to curb inflation, could pose challenges for the ongoing bull market.
“That could cause a re-tightening of the financial conditions. And this would create a headwind for the bull market.”
Based on Ecoinometrics’ analysis, the Chicago Federal Reserve’s National Financial Conditions Index (NFCI), which gauges the U.S. financial system’s restrictiveness, has come to a standstill and currently matches its reading from late in the year 2022 when interest rates initially began rising.
According to the graph, the NFCI’s growth appears to be slowing down, potentially contributing to the downturn in risky assets like Bitcoin, econometrically speaking.
“If it just stays at that, then we are simply experiencing a pause in the bull market. But if this is a pivot in the financial conditions, the bull market would be in trouble.”
“Next week marks an exciting development as Hong Kong’s Bitcoin and Ethereum spot ETFs commence trading. The growing interest signifies a potential influx of Asian institutional capital into the market.”
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2024-04-29 23:40