Bitcoin falls out of favor after losing grip on $22K, Fund flows Report shows
Bitcoin lost its popularity last week, after dominating crypto inflows for the majority of the year. According to the most recent weekly report, this is according to Digital Asset Fund Flows Report produced by CoinShares, a crypto analytics firm that tracks investment flows into and from digital asset investment products. Bitcoin dropped to below $22,000 last Thursday for the first time since mid January.
CoinShares reported that Bitcoin investment products experienced a net outflow of $10.9million last week, while altcoin investments products saw an inflow of $3.9million. It is worth noting, however, that short-Bitcoin investment products saw a net outflow of $3.5million last week. Some investors may have taken advantage of the recent pullback in order to profit from or reduce losses on their short positions following 2023’s rally.
Ethereum is finally getting some love. Inflows to Ethereum, the world’s second largest cryptocurrency in terms of market capitalization and dominant Decentralized Financing/Application blockchain infrastructure provider, reached $5.1 million. This brings its total year-to date inflow to $15 Million. This is still far behind Bitcoin, which saw inflows of $183 millions for related investment products.
Fear of Fed tightening causes net crypto outflows
CoinShares attributed the $7 million net outflow in digital asset investments to investors becoming “spooked” by the possibility of further rate hikes by US Federal Reserve. This was in the wake of “a week that saw macro data that significantly exceeded expectations to the upside”. The week before, the US jobs and ISM Services PMI survey data for January surprised to the upside. This indicates that the US economy is still quite hot, and boosts confidence at the Fed that they are able to continue with rate increases without triggering a recession.
Macro Risks Continue to Test Investors
If macro headwinds continue, this week could follow the lead of last. This week will likely see more outflows from digital assets investment products. Crypto traders will be closely monitoring Tuesday’s US Consumer Price Index report (CPI). Economists predict an increase in MoM inflationary pressures which, if confirmed by Fed policymakers, could worry crypto bulls and increase their determination to keep interest rates at 5.0% for a while.
This could reinforce the uptrend in the US dollar’s performance against its major G10 counterparts and in US bond yields. It could also increase the impact of crypto on the US dollar. A rise in US inflation could cause Bitcoin to fall towards the $20,000. Support area (the 18Th January low and 50DMA. If the price falls below this level, it will open the doors to testing the 200DMA or Realized Price in the upper $19,000s.
The US Retail Sales data will be available on Thursday. This will help to predict the likelihood of the US entering a recession later in the year. Market participants will also pay attention to remarks by a few Fed policymakers throughout the week.