Bitcoin (BTC) experienced notable selling pressure last week as significant net outflows from Spot Bitcoin ETFs were recorded, ending a 20-day streak of positive inflows. This trend is reminiscent of the outflows observed at the end of April, according to Bitfinex Alpha.
ETF Flows and Market Sentiment
Historical data indicates that ETF investment flows are a useful metric for gauging investor sentiment on BTC. However, these flows tend to be reactionary to price changes rather than predictive of market direction. Notably, whenever BTC surpasses the $70,000 mark, net ETF inflows have approached $1 billion per day. With BTC prices declining last week, ETF flows were negative on four out of five days.
Impact of US Economic Indicators
A key factor influencing BTC’s valuation last week was the release of US consumer inflation data and the Federal Reserve’s interest rate decisions. The Fed’s indication to maintain current interest rates while postponing potential rate cuts until December caused market jitters. Despite this, other economic indicators such as easing CPI and PPI figures, along with a loosening labor market, suggest room for optimism that rate cuts could occur as early as September.
Role of Whales, Long-Term Holders, and Miners
On-chain metrics revealed that most of the selling pressure came from long-term holders, whales, and miners rather than ETF investors. The Hodler Net Position Change metric, which tracks whale holdings, has shown consistent negative values for the past nine days. Additionally, the Bitcoin:Exchange Whale ratio has increased as more whales deposit balances on exchanges. These entities hold more BTC than ETFs and have significantly impacted the market.
Miner reserves have continued to decline, even post-halving, indicating that miners are struggling to maintain operational efficiency. They are selling assets to remain profitable and invest in upgraded machinery. With miner reserves nearing four-year lows, the selling pressure from this group might be approaching a critical low.
Positive Signals for Ether ETFs
Meanwhile, the prospects for an Ether ETF looked promising last week. SEC Chairman Gary Gensler hinted at a potential approval in the coming months. Analysts predict that the first spot Ether ETF could debut as soon as July 2nd, following feedback that the SEC requires only minimal adjustments from applicants.
CBDC Experiments on the Rise
A recent BIS survey revealed a significant increase in Central Bank Digital Currency (CBDC) experiments among central banks. The number of proof of concept projects rose by 35 percent, and pilot projects nearly tripled from 2022 to 2023, especially in advanced economies.
These developments underscore the evolving landscape of the cryptocurrency market. As BTC navigates these pressures, the market continues to adapt to new economic indicators and regulatory signals.
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