Wall Street bank Citi (C) said the crypto market’s latest bout of weakness comes despite stocks performing well, with sharp selloffs in October denting investor confidence.
The Oct. 10 selloff reduced risk-taking not only among leveraged crypto traders, but also among new spot exchange-traded fund (ETF) investors, who have since exited, analysts Alex Saunders and Nathaniel Rupert wrote in a Tuesday report.
Flow to US spot bitcoin ETFs have slowed sharply in recent weeks, undermining what analysts call a key pillar of support for their positive outlook.
The bank’s forecast assumes steady inflows into ETFs as financial advisors and other investors gradually add exposure to bitcoin. As this momentum fades, the report warns that sentiment could remain weak.
Onchain data adds to the cautious tone. Analysts have noted that the number of large Bitcoin holders has declined while smaller retail holdings continue to increase, a sign that some long-term investors may be selling. The decline in funding rates further suggests a decrease in demand for leverage.
From a technical point of view, the outlook is not improving either. Bitcoin has fallen below its 200-day moving average (SMA), a level that Citi believes could further strain demand given the market’s reliance on these indicators. The bank also linked Bitcoin’s weakness to tight bank liquidity as reserves have been depleted and short-term rates remain high.
Although the industry is still early in its broader adoption cycle, the report concludes that spot ETF flows remain the key signal to watch for any changes in cryptocurrency sentiment.
Learn more: Citi Says Correlation Between Crypto and Stocks Tightens as Volatility Returns
