One of the main tailwinds believed to have fueled bitcoin’s recent rise above $80,000 appears to be fading.
The 11 U.S. spot-listed Bitcoin exchange-traded funds (ETFs), which attracted $3.29 billion in investor money in March and April, are now fleeing. And the most important ones at that.
Investors withdrew $635 million from those funds on Wednesday, the highest single-day net outflow since Jan. 29, according to data source SoSoValue. This was not an isolated event either. Over the past five trading days, ETFs have lost a total of $1.26 billion, bringing total net inflows since their January 2024 debut to $58.5 billion, from $59.76 billion a week ago.
Bitcoin has stopped recovering. Since last Wednesday, the rally that took prices from $65,000 to over $80,000 has stalled, with momentum fading near the 200-day simple moving average, which sits just above $82,000. Over the past 24 hours, bitcoin has fallen more than 2% to $79,400, with analysts attributing the loss to resurgent inflation fears in the United States, although these macroeconomic developments have been largely ignored by the Nasdaq and Wall Street’s S&P 500 stock index. Both of these indexes reached new highs on Wednesday.
The outflow of $635 million is not a figure that bulls can easily ignore, especially as strong capital inflows in March and April were widely hailed as bullish catalysts, and the macroeconomic situation is deteriorating due to rising inflation in the United States.
“A persistently high CPI, a new Fed under Warsh that markets view as more hawkish, or another oil shock can squeeze bitcoin even with positive net flows. From our perspective, the more useful question is not whether the margin surge continues, but whether macroeconomic conditions remain loose enough for flows to do their job,” said Adam Haeems, head of asset management at Tesseract Group. Tesseract has over $500 in assets under management.
It is worth noting, however, that the relationship between ETF flows and bitcoin is no longer as simple as it once was. A correlation study offers a more data-driven view on this subject.
The 90-day rolling Pearson coefficient between bitcoin’s daily percentage return and the daily percentage change in cumulative ETF net inflows currently stands at just 0.16, statistically indistinguishable from zero and down from February’s high of 0.68.
Simply put, knowing the direction ETF flows moved on a given day may not provide clues about BTC price action. That said, large buybacks like the one seen on Wednesday still count.
