Key Points
- The week ending April 26 saw a $435 million outflow from cryptocurrency investment products.
- Bitcoin (BTC) funds led the outflows with $423 million, while Ether (ETH) products also experienced withdrawals of $38 million.
The week ending on April 26 marked a significant outflow from cryptocurrency investment products, with a total of $435 million being withdrawn. This marks the third consecutive week of outflows as the price of Bitcoin remains rangebound in the low $60,000 range.
Outflows and Inflows
Bitcoin funds experienced the largest outflow, with $423 million exiting the market after the halving event. Additionally, Ethereum investment products also saw withdrawals of $38 million, marking their seventh consecutive week of negative flow. On the other hand, Solana (SOL) and Litecoin (LTC) exchange-traded products (ETPs) experienced deposits, posting net inflows of $4.1 million and $3.1 million, respectively.
The negative outflows are likely due to a slowdown in inflows from new issuers, which recorded only $126 million in inflows last week, a significant decrease from $254 million the week prior. BlackRock’s Bitcoin ETF, IBIT, recorded zero flows for the first time last week, and other issuers have also experienced days of zero inflows over the last few weeks amid slowing outflows from Grayscale’s GBTC.
Market Speculation
Market speculation suggests the negative outflows are a result of investors’ concerns about U.S. stagflation – a combination of slower economic growth rate and sticky inflation, which further weakens the probability of the Fed rate cuts. Traders are currently placing the odds of a June rate cut at just 11.3%, with higher odds for September and November. This suggests that market analysts are betting that the U.S. Federal Reserve will hold rates steady in May and June, with the first possible cut being later in the year.
Despite the slowdown in Bitcoin ETF inflows, Bernstein analysts believe this is a short-term pause before Bitcoin resumes its bull run. The analysts emphasized their $150,000 cycle target for the Bitcoin price by the end of 2025, citing unprecedented ETF demand, which has seen $12 billion of spot Bitcoin ETF net inflows since their market debut on January 11.
However, a report by Ecoinometrics warns of a potential pivot in the financial conditions that could impact the Bitcoin bull market. The report suggests that while spot Bitcoin ETFs have opened up a new source of demand, changes in macroeconomic conditions and the failure of the U.S. Federal Reserve to control inflation could trouble the bull market.
The Federal Reserve Bank of Chicago’s National Financial Conditions Index (NFCI), which measures the level of tightness in the U.S. financial system, is stalling and is at the same level it was in 2022 when the rates started hiking. This could be a possible explanation for why risk assets, such as Bitcoin, are bearish.
Despite the potential challenges, there is a potential positive catalyst next week as the HK BTC and ETH spot ETFs begin trading. This could serve as a gateway for the inflow of Asian institutional capital.
