Bitcoin appears to be on a path that contradicts the bullish outlook many investors had after the network halving on April 19. The coin fell 11% in the last day, trading at $56,889 on Wednesday afternoon, according to CoinGecko data. The cryptocurrency was trading at around $64,000 on the halving date. The price is down 20% since mid-March, when it reached an all-time high of $73,000.
With the halving in the rearview, and exchange-traded fund flows exhausted, “this leaves bitcoin watchers focused on the macroeconomics, and the picture is cloudy at best,” said Andrew Behr, head of product at CoinDesk Indices. luck.
The latest inflation rate, as of March 31, was 3.48%, according to the Consumer Price Index, up from 3.2% in February. This has dampened hopes that the Federal Reserve, which meets on May 1, will be able to lower interest rates. “This creates a challenging market for risk assets in general, and Bitcoin and cryptocurrencies tend to follow suit,” said David Lawant, head of research at FalconX. luck.
ETF flows began to slow when US inflation was higher than expected for the second month in a row. Since March 18, ETFs have seen outflows on 58% of all trading days, according to 10x Research, with outflows of $580 million since the halving.
Last week, BlackRock's winning product, IBIT, saw zero inflows for the first time, according to CoinGlass data, ending a 71-day streak of new investments. The Fund has not announced any inflows since then. Also, last Thursday, Fidelity's FBTC, the current runner-up in the ETF race, announced its first outflow, which has also continued since then, totaling $67.6 million.
The average ETF buyer may be “underwater,” said Markus Thelen, CEO of 10X Research. luck. The total entry price is estimated at $57,300 for equity holders, slightly less than the value of the underlying asset. He added: “Given fears of stagflation, we expect more selling in the near term.”
In the derivatives market, liquidations in bitcoin and ethereum futures have totaled more than $300 million since Tuesday, also creating downward pressure on prices, according to CoinGlass data.
The liquidations could be due to TradeFi tourists pushing long positions up to the halving, Thelen says, as well as Bitcoin miners selling supplies to protect their runs that are expected to be in the $53,000 to $55,000 region.
Experts also cautioned against expectations that an immediate post-halving rally could negate these macroeconomic conditions, pointing instead to a longer-term rally taking months rather than weeks.
For example, according to CoinGecko data, two weeks after the previous halving in May 2020, the price of Bitcoin rose by only 1.5%, and stabilized over the following two months. But in less than a year from that point, the price had risen more than 500%. Likewise, after the halving in July 2016, there was no significant price movement until three months after the event, until it began a gradual upward climb, culminating in a 3,000% price increase by the end of the following year.
“The market is looking for the next industry catalyst in the short term after the halving and launch of spot crypto ETFs in Hong Kong, for which some players may have set somewhat high expectations,” Lawant said.